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INVESTING FOR THE FUTURE

ANNUAL REPORT 2017 GROUP | ANNUAL REPORT 2017

TABLE OF CONTENT

01. Key Highlights of 2017 04 15. 42

02. Business Snapshots 06 16. 44

03. Chairman’s Statement 08 17. Morroco 46

04. Board of Directors 10 18. 50

05. Our Journey 14 19. 54

06. GCEO’s Statement 16 20. 55

07. Management Team 18 21. Etisalat Services Holding 56

08. Vision and Strategy 22 22. 58

09. Key Events of the Year 26 23. Human Capital 60

10. Operational Highlights 28 24. Corporate Social Responsibility 64

11. Etisalat Brand Ever Higher 32 25. Corporate Governance 68

12. Etisalat Group’s Footprint 34 26. Enterprise Risk Management 71

13. UAE 36 27. Financials 74

14. E-vision 41 28. Notice for General Assembly Meeting 151

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KEY HIGHLIGHTS OF 2017 51.7 26.0 8.4 AED AED AED BILLION REVENUE BILLION EBITDA BILLION NET PROFIT 80 8.0 142 FILS AED MILLION DIVIDEND PER SHARE BILLION CAPEX AGGREGATE SUBSCRIBERS

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BUSINESS SNAPSHOT

The future of the telecoms industry is undoubtedly digital this new network will facilitate the Group’s digital growth and and this will present a wide array of new challenges and transformation. opportunities. In 2017, Etisalat Group’s drive to invest in the undoubtedly digital future of gained At the same time, Etisalat has continued its practice of high cash momentum. The Group and its operating companies harnessed generation, so that it can continue to reward its shareholders and the potential of emerging technology via the establishment of grow its business. The Group has sustained a generous dividend a digital unit, a strong corporate strategy based on new core programme with close to AED 21 billion, including 10% bonus values, accelerated investment in network infrastructure, and share, returned to shareholders over the past three years. spectrum licenses to empower customers, shareholders, and society in general. Since its inception, Etisalat has maintained a high level of capital expenditure to support wider coverage, higher speeds, and greater Etisalat’s bold new vision to drive the digital future of telecoms capacity in its networks. Etisalat’s primary focus at present is on saw the establishment of a dedicated digital unit in 2017. This securing a leadership position in the more lucrative data segment unit is propelling the Group’s evolution in this arena by enabling and expanding into Digital and ICT segments. To this end, the operating companies across the footprint to develop their Group recently invested in spectrum licences in Egypt, , unique competencies, thereby capitalising on the growing digital , Pakistan, Afghanistan, , , and Cote opportunities within these regions. D’Ivoire to support its push into mobile data services and to support future growth. At the same time, Etisalat Group’s investment in the future involved a consistent proactive approach to all operations, Etisalat Group’s investments in its own infrastructure and based on the Group’s new core values (Customer Centricity, assets are ultimately investments in the regions in which it Collaboration, Agility and Empowerment). The Group’s new operates. This, in turn, further strengthens Etisalat’s capacity corporate strategy underpinned the following vital focus areas to do business in these countries. In particular, Etisalat has for the transformation of operating companies into market helped the UAE to sustain its position as the region’s business, strongholds: Ownership and management of an attractive, well- trade and foreign investment hub by providing reliable, high- balanced portfolio of assets; Growth of business-to-business quality services for over 40 years. It has accomplished this and digital market penetration across the footprint; Capability through extensive investment in the development of world- and talent development; Accelerated value generation through class networks where both fibre-to-the-home (FTTH) and LTE innovation and digitisation. roll-out covers over 95% of the population. As a result of these endeavours, the UAE leads the region and the world in To further enhance its market position and go on exceeding technology innovation and deployment as well as high-speed customer expectations, Etisalat accelerated its investments in broadband penetration. network coverage and partnerships in 2017. As part of this, the Group expanded its + network coverage in Morocco to In the years to come, Etisalat Group will hold onto this leadership 93% of population, deployed a 4G network in Egypt, acquired position via sustained growth and innovation within the UAE’s additional spectrum and was awarded universal license in Saudi multi-billion-dollar telecom market and all others across its Arabia, and invested in network licenses and expansion in the footprint, with particular emphasis on the digital and ICT sub-Saharan region. The Group also successfully launched the segments. By continuing to create the world’s best networks in first 5G Ultra-Mobile broadband experience in the United Arab all the markets in which it operates, Etisalat Group will go on Emirates. By leveraging the of Things (IoT) and The Cloud, delivering long-term value for all stakeholders.

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consumers, accelerate the economic growth of businesses, and and by being a socially responsible corporate citizen who enhance the competitiveness of the markets where it operates. demonstrates the country values.

Today, by developing one of the best infrastructures in the world, Our geographic footprint today presents substantial opportunities Etisalat has supported in building a diversified and sustainable and at the same time some challenges. Etisalat has always seen economy and will continue to be driven by UAE’s vision that beyond the obstacles and acted diligently to protect the long- aims at making the country among the best in the world by term interests of its shareholders and will continue its efforts to the Golden Jubilee of the union. We are honored that Etisalat maintain a healthy business portfolio. was able to contribute in realizing the aspirations of UAE’s leadership when it comes to being at the forefront of the digital Today, we look at the future with confidence and optimism and development in the region. are determined to build on solid ground to continue innovation and focus on driving digital transformation to take advantage For more than four decades, Etisalat has been able to meet the of future opportunities that will enable us to add value to our needs and expectations of millions of our customers across its shareholders and customers. footprint. Enhancing customer experience remains at the core of our strategy enabling us to launch innovative services and solutions I would like to thank the leadership of the UAE for their making a positive impact on their daily lives. continued support to Etisalat Group and like to express my sincere appreciation to our customers for their unwavering confidence In 2017, Etisalat Group continued to achieve strong positive results and our shareholders for their continued support and special with consolidated net profit after Federal Royalty amounted to AED thanks to Etisalat management team for their commitment and 8.4 billion resulting in a net profit margin of 16%. While Aggregate dedicated work that will drive us to move forward and continue subscriber base reached 142 million, 12.6 million of which are in the our progress and success. UAE representing YOY increase of 3%. Etisalat Group also continued to maintain its high credit rating.

Etisalat Group continues to be a partner to the communities in countries it operates in by being committed to improving their lives with continuous contributions to local, regional Eissa Mohamed Ghanem Al Suwaidi and international development and humanitarian initiatives. Chairman - Etisalat Group In 2017, and under the ‘Year of Giving’, Etisalat was active CHAIRMAN’S STATEMENT throughout the year with activities that gave back to various sectors of the society.

Today technology has a major impact on the daily lives of people with our efforts focused on creating unique capabilities and “We look at the future with confidence and optimism. We are determined to improving competitive advantage through the interaction of continue innovation and focus on driving the digital transformation” technology and people. Etisalat worked on initiatives to target specific segments of the society. is an example of ICT integration in teaching and learning working alongside Etisalat Group achieved positive performance in 2017 despite in the region by proactively responding to technological with the government implemented ICT initiatives across schools the rapid developments in the telecom sector as a result of the developments, and by adopting to the latest innovations and in Morocco. Our long-standing commitment to supporting good transition to the digital era and the unprecedented changes in industry trends. health was visible across our footprint such as Etisalat Misr’s the macroeconomic and geopolitical arenas in our footprint. participation with World Health Organisation to provide free Under our new powerful digitally inspired vision, our treatment to thousands of Hepatitis C patients. As an industry leader, and as part of our natural progression, operating companies will be working jointly to realize such we are transitioning into a digital organization both internally digital ambition that will maximize growth opportunities Etisalat will continue to contribute to the country’s progress and externally across our markets, albeit with different moving forward. Etisalat Group’s vision captures its winning, and prosperity, both through the group’s positive performance, trajectories. Etisalat Group has led the transformation transformative position as it will help re-shape the lives of advanced infrastructure, and contribution to national agenda,

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BOARD OF DIRECTORS

Eissa Mohamed Ghanem Al Suwaidi Abdulla Salem Obaid Salem Al Dhaheri

Chairman of the Board Board Member Chairman of Investment & Finance Committee Member of Nomination & Remuneration Committee

Sheikh Ahmed Mohd Sultan Bin Suroor Al Dhahiri Hesham Abdulla Qassim Al Qassim

Vice Chairman Board Member Member of Audit Committee Member of Nomination & Remuneration Committee

Essa Abdulfattah Kazim Al Mulla Mohamed Sultan Abdulla Mohamed Alhameli Board Member Board Member Chairman of Audit Committee Chairman of Nomination & Remuneration Committee

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BOARD OF DIRECTORS

Abdulfattah Sayed Mansoor Sharaf Khalid Abdulwahed Hassan Alrostamani

Board Member Board Member Member of Investment & Finance Committee Member of Audit Committee

Abdelmonem Bin Eisa Bin Nasser Alserkal Otaiba Khalaf Ahmed Khalaf Al Otaiba

Board Member Board Member Member of Nomination & Remuneration Committee Member of Investment & Finance Committee

Mohamed Hadi Ahmed Abdulla Al Hussaini* Hasan Al Hosani

Board Member Company Secretary Member of Investment & Finance Committee

*Resigned from the board on 28th February 2018

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INVESTING FOR THE FUTURE

1976 1995 2004 2006 2012 2016 Emirates Corporation Internet services are rolled out across the • Etisalat wins the second license in • Etisalat wins the third mobile license in Etisalat wins license in Afghanistan • Etisalat Group completed the sale of is founded. country, another first in the region. Saudi Arabia, introducing Etihad Egypt and launches the country’s first and and launches the first 3G Etisalat’s shareholdings of 92.3% in Canar. Etisalat, . 3G network . services in Afghanistan. • Etisalat Misr acquired 4G license and 1982 1996 • Etisalat buys a stake in Canar, a fixed • Etisalat awarded a license to provide fixed virtual license in Egypt. Emirates Telecommunications Cor- Etisalat becomes one of the founding line operator in Sudan. mobile services in Afghanistan. 2013 • Inclusion of Etisalat Group in FTSE poration launches ’s first investors in satellite telecommunications • Etisalat Services Holding is formed Etisalat signed SPA with to Russell Emerging Markets Index. mobilenetwork. provider, Thuraya. to manage eight business units that acquire Vivendi’s 53% stake in Maroc offer mission-critical telecoms related Telecom Group. services to the industry.

1983 1999 2005 2007 2014 2017 The ownership structure changes with the • The Middle East’s first broadband • Etisalat acquires a stake and takes Etisalat acquires a stake in a green-field • Etisalat completes acquisition of 53% • Etisalat Misr launched 4G services government getting Internet service using the latest ADSL management control of PTCL, the operator EMTS in , the largest and shareholding in Maroc Telecom. in Egypt. a 60% share in the company and the technologies is introduced. incumbent fixed operator in Pakistan. fastest growing market in . • Etisalat successfully issued its inaugural • Etisalat launched new mobile brand remaining 40% is publicly traded • Etisalat buys stake in Tanzanian • Etisalat expands into West Africa by bond under its Global Medium Term “Swyp” targeting the youth segment in operator Zantel, its first step towards taking a stake in Atlantique Telecom 2008 Note (GMTN) programme listed on the the UAE. 1994 becoming a major international with operations in Benin, Burkina Etisalat completes the rollout of a nation- Irish Stock Exchange. • Etisalat Group exited Nigeria. • The Middle East’s first GSM service is telecoms group. Faso, the , wide fibre optic backbone in the UAE. • Etisalat successfully completed the introduced in the UAE. , Ivory Coast, Togo, and Niger. 2015 fastest 5G live trial globally reaching • Etisalat launches Emirates Data 2000 2009 • Etisalat Group completed the sale of its 71 Gbps. Clearing House, now one of the world’s Etisalat introduces the E-Vision brand for Etisalat acquires Tigo, a Sri Lankan operations in Benin, the Central African leading clearing houses - providing a its cable TV services. operator, which is later rebranded to Republic, Gabon, the Ivory Coast, Niger, complete solution to GSM operators Etisalat Lanka. Togo and Tanzania. to provide roaming facilities to their 2003 • Allowing foreign and institutional 2011 customers in turn. Etisalat launches the Middle East’s first investors to own up to 20% of Etisalat Etisalat introduces 4G (LTE) experience to 3G network. Group’s shares. its customers in the UAE. • Inclusion of Etisalat in the MSCI indexes.

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challenges, such performance and accomplishments has helped Etisalat’s belief of the importance of open innovation and the need Etisalat to stand out as the most valuable brand in the Middle to elevate the innovation level in the surrounding ecosystem, was East with a brand value of 7.7 billion USD, which was the the drive behind establishing the ‘Etisalat Open Innovation Center’ outcome of many qualities and core competencies that underpin in 2017 marked another important milestone where we aim to our success, and the ultimate translation of all our achievements showcase future technologies and solutions to our customers and the lasting associations that we leave behind in people’s enabling them to make decisions that support in making the minds and hearts. digital dream a reality.

Etisalat has launched a new bold vision and an associated Etisalat also aims to continue giving young companies a platform to corporate strategy to maximize shareholder value in light of the engage with experts, have access to Etisalat’s robust network and ongoing evolution within the telecom sector and the challenging utilise our digital technologies to build viable products that create macroeconomic and geopolitical situations exhibited in some new revenue streams. Moreover, Etisalat’s partnership with of its operating markets.. From the slowdown of GDP in certain Future Accelerators, the world’s largest government supported countries to devaluation of some currencies, the circumstances accelerator, was an important step in this direction, which paired remain challenging, yet we continue focus on our balanced and top start-ups with government entities allowing them to build, test healthy portfolio. and deploy solutions for 21st-century challenges.

Etisalat’s footprint today is spread across 16 countries serving 142 Etisalat will remain committed to sustaining its technological million subscribers in the Middle East, , and Africa. And while leadership by investing in emerging and next generation our operating companies differ in the level of their digital maturity, technologies; Etisalat’s investment in 5G technologies is a prime we believe in our ability to transform internally and to elevate the example that has gained relevance because it is considered a digital capability across all markets organically. Such effort will major enabler for the gigabit internet and the Internet of Things, go hand in hand with our strategic imperative of solidifying our which is expected to surge exponentially as a natural outcome of position in all operating markets aided by superior network, strong global adoption of connected devices. With its implementation, core business, and new revenue streams. 5G will provide opportunities for economic growth and massive developments in the areas of education, employment, Moreover with the acquisition of 4G license in Egypt via Etisalat transportation and more. Misr, we are now offering 4G services in the majority of our operations. We foresee such investments as foundational in Within that context, we had a successful launch of the first our digital journey and a solid testament of our plans to make 5G Ultra-Mobile broadband experience in the region. A pre- GROUP CEO’S STATEMENT technology available to our customers. commercial 5G network was deployed in certain locations within the UAE. With the fastest 5G live trial reaching 71Gbps, this was Launch of swyp, which is the new youth digital platform in the another record in the region, UAE, was an important acknowledgement of the major shift in consumer behaviours and a declaration of the importance of the At the end, I would like to thank the leadership of the UAE new tech savvy generation, the millennials. With a complete new for their continuous support and for paving the way with “Our journey in 2017 has set the path for gearing the company, its customers customised digital platform and substantial value, we managed their futuristic vision, hence, giving us a platform to excel to offer a unique proposition in a digital, hassle free approach to and demonstrate our capabilities. The UAE’s strong ties and and shareholders towards achieving successful digital transformation” such a growing segment. relationships across our footprint have helped grow and expand our achievements taking it on a global scale. Appreciation is And while talking about 2017, it would be hard to miss the new also extended to our dedicated employees, loyal customers, and game changing developments in the fields of Artificial Intelligence shareholders who by trusting and investing in our growth have Our journey in 2017 has set the path for maintaining good Our achievements in 2017 are a clear indication that we and Robotics, which we didn’t overlook and considered primitively contributed at every stage in Etisalat Group’s success story. performance while gearing the company, its customers and remain in a strong position, and represent the outcome of our in various trials, as we pioneered a dedicated strategic program shareholders towards achieving successful digital transformation. sincere efforts and focused strategies. We were able to deliver with prime focus on assuring that Etisalat capitalizes such Our continued investments in next generation technologies, open consolidated revenues of AED 51.7 billion and consolidated technology for the best interest of business and customers. Such a innovation, and our entrepreneurship across all fields were the operating profit before federal royalty of AED 17.45 billion move will support our digital transformation and is believed be to Saleh Abdulla Al Abdooli levers that allowed us to reach this far. representing 3% increase YOY. Despite the global economic promising on the longer term. Chief Executive Officer - Etisalat Group

16 17 YOUNIS ABDUL AZIZ AL NIMR Chief Human Resources Officer, Etisalat Group

ETISALAT GROUP | ANNUAL REPORT 2017

MANAGEMENT TEAM

Engineer Saleh Abdulla Al Misr. He built and launched Services Holding and Thuraya. Mr. Dowidar joined Etisalat its early start-up operation He holds a Bachelor Degree Abdooli was appointed as Chief the first 3G operator in Egypt Al Abdooli holds Bachelor’s Group in September 2015 in 1999 as Chief Marketing in Communications and Executive Officer of Etisalat in 7 months. In less than five and Master’s in Electrical as Chief Operating Officer Officer. After successfully Electronics Engineering from Group in March 2016. Prior years, he achieved 27% of Engineering and Telecom from and was appointed as Chief undertaking two group Cairo University and an MBA to this role, Mr. Al Abdooli revenue share, 28% market University of Colorado at Executive Officer Etisalat assignments and the role from the American University was the CEO of Etisalat UAE share, 36% EBITDA margin, Boulder, USA. International in 2016. Prior of CEO Vodafone Malta, he in Cairo. since 2012. A strong and and 99% 2G/3G coverage. to this, Mr. Dowidar was became the CEO of Vodafone charismatic leader, Saleh rose Mr Abdooli also serves on Chairman of Egypt from 2009 - 2014. Mr. HATEM DOWIDAR SALEH ABDULLA AL ABDOOLI to international fame after the Board of Maroc Telecom and Group Chief of Staff for Dowidar serves on the Boards Chief Executive Officer, Chief Executive Officer, his resounding success in Group, Mobily, Etisalat Misr Vodafone Group. He initially of Maroc Telecom Group, Etisalat International Etisalat Group Egypt as the CEO of Etisalat and is the chairman of Etisalat joined Vodafone Egypt in PTCL, and Etisalat Misr.

Mr. Okandan joined Etisalat in Turkcell. Mr. Okandan is a board Mr. Al Shamsi was appointed Mr. Al Shamsi has held Mobily. Mr. Al Shamsi has a January 2012 as Chief Financial member and Chairman of the as Chief Strategy & Corporate various key senior positions Bachelor’s degree in Electrical Officer of Etisalat Group. Prior audit and risk committee of Governance Officer of including Vice President Engineering from the to his appointment, he was PTCL, Ufone, Etisalat Services Etisalat Group in 2016. Prior and Senior Vice President University of Kentucky, USA. the Group Chief Financial Holding. He is also a board to this role, Mr. Al Shamsi of Marketing of Etisalat Officer of Turkcell. Mr. Okandan and audit committee member held the position of Chief UAE. Mr. Al Shamsi serves started his professional career of Maroc Telecom Group and Digital Services Officer on the Boards of Mobily, at PricewaterhouseCoopers Mobily. Mr. Okandan graduated KHALIFA AL SHAMSI and Senior Vice President PTCL, Ufone and Etisalat SERKAN OKANDAN in 1992, and worked for DHL from Bosphorus University with Chief Strategy & Corporate of Technology Strategy of Afghanistan, Chair E-vision’s Chief Financial Officer, and Frito Lay as a Financial a degree in Economics. Governance Officer, the Etisalat Group. Since Board and appointed the Etisalat Group Controller before joining Etisalat Group joining Etisalat in 1993, Managing Director of

Mr. Al Nimr was appointed as Mobily – KSA for two years from University of Wollongong Mr. Ahizoune has been 2006, and also serves as a commission. He holds an Chief Human Resources Officer with the startup team, and in 2003. Chairman of the Maroc board member of several engineering degree from of Etisalat Group on March in 2008 he was seconded Telecom Management Board foundations: Inter Alia; Télécom ParisTech. 2016. Prior to that he was as CHRO – Etisalat Misr for since February 2001 and served King Mohammed V for CHRO of Etisalat UAE since three years. Mr. Al Nimr is as CEO from 1998 to 2001. solidarity; King Mohammed 2012. Mr. Younis joined Etisalat a board member of ESH. He Earlier, he was Minister of VI for the environmental in December 1991, and held graduated from California Telecommunications in four protection, and Princess Lalla several positions in HR, such Baptist University with B.Sc. different governments. Mr. Salma against cancer. He is YOUNIS ABDUL AZIZ AL NIMR as Vice President Talent in Business Administration in ABDESLAM AHIZOUNE Ahizoune has been Chairman also the Vice-President of Chief Human Resources Officer, Management and Regional HR. 1990 and earned a Master of Chairman of the Management of the Moroccan Royal CGEM and the President of its Etisalat Group On 2004, he was seconded to Quality Management Degree Board, Maroc Telecom Group Athletics Federation since Moroccan-Emirati economic

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Mr. Khan was appointed CEO Ufone, he was the CEO and various start-up companies. of Ufone in August 2017. Mr. a Board member of Mobilink He holds a Master’s degree in Khan started his career in the Pakistan for 6 years. During Electrical Engineering from the Pakistan telecom industry in that period, he also served as USA and is the co-inventor of 1994 with Paktel, moving to a Board member of a couple of 3 USA patents. Mobilink as Chief Commercial Orascom Telecom subsidiaries Officer from 2000 to 2006, and as the Chairman of MANAGEMENT TEAM and then to Banglalink in Waseela Microfinance Bank. RASHID KHAN Bangladesh as Managing Mr. Khan has previously Chief Executive Officer, Director and a Board Member worked for 15 years in the Ufone Pakistan till 2008. Just prior to joining Silicon Valley, California for

Daniel Ritz was appointed as each of the Group’s Executive Ritz holds a Ph.D from the Mr. Amiri was appointed UAE operations. Mr. Amiri a B.Sc. degree in Electronic and PTCL Group Chief Executive Board, Fastweb, Belgacom Hochschule St. Gallen in as Group Chief Carrier & served as Chairman of the GSM Electrical Engineering from Officer in March 2016, Prior and Swisscom IT Services. Switzerland. Wholesale Officer of Etisalat Arab World and as a Member Kings London University. to this appointment, he was He also served as Chairman Group on March 2016. Mr. of the GSM Association the Chief Strategy Officer of Swisscom’s Hospitality Amiri started his career Executive Committee. He for Etisalat Group since Services and as CEO of with Etisalat in engineering is currently Chairman of a February 2012. Dr. Ritz was Swisscom (Central & Eastern department and held various couple of International Cable the Chief Strategy Officer Europe). Prior to joining key positions including Consortiums, such as IMEWE & DANIEL RITZ at Swisscom Group where Swisscom, he was a partner Executive Vice President RCN. Mr. Amiri, also serves as Chief Executive Officer, he held various positions at BCG. Dr. Ritz also serves ALI AMIRI Operations and Chief Carrier & the Chairman of the Board of Chief Carrier & Wholesale PTCL Group including Board member of on the board of Thuraya. Dr. Wholesale Officer of Etisalat e-Marine PJSC. Mr. Amiri holds Officer, Etisalat Group

Mr. Metwally was appointed and customer care functions. Mr. Al Awadi appointed as joined Etisalat’s International Telecommunication Technology Chief Executive Officer of In 2012, he was promoted Chief Procurement Officer Investments Division LLC and Smart World. He holds Etisalat Misr in October to Chief Operating Officer of Etisalat Group in October between 2006 and 2011 an MBA degree in Finance 2015. He started his telecom expanding his responsibilities 2017. He was the Chief where he handled Mergers from American University of career in 1999 in sales to include Carriers Relations Financial Officer of Etisalat and Acquisitions and held Dubai and Bachelor of Business distribution and operations and Wholesale Operations. UAE operations for the period various positions including Administration degree from focusing on both consumer Mr. Metwally holds a bachelor 2011 and 2017. He started his Vice President International Georgia State University, USA. and corporate segments. He degree in Telecommunications career with Etisalat in Finance Investment MENA. Mr. Al HAZEM METWALLY joined Etisalat Misr in 2006 and Electronics Engineering AHMED AL AWADI department in 1999. On 2004, Awadi serves on the Boards Chief Executive Officer, as Chief Commercial Officer from Cairo University. Chief Procurement Officer, he was seconded to Mobily, of Etisalat Software Solutions Etisalat Misr managing sales, marketing, Etisalat Group KSA, for two years. Later, he (Private) Limited, Ubiquitous

Mr. Aboudoma appointed between 2009 and May 2011. Engineering from Cairo Mr. Dukandar was appointed as forensics. Prior to Etisalat, on the Audit Committee of as the CEO of Mobily in He was part of the team that University and completed Chief Internal Control & Audit he was the Group Executive Maroc Telecom Group and January 2017. Prior to this launched MobiNil services International Executive Program Officer in September 2016. Telkom Audit Services with PTCL. He has a Bachelor of appointment, he held the in Egypt between 1998 and in Business Management from Mr. Dukandar is a Chartered Telkom South Africa SOC Commerce from the university position of Managing Director 2008. In addition, he led the INSEAD Business school in Accountant (SA), Certified Limited since 2009. Mr. of Witwatersrand, South Africa and CEO in Global Telecom team of (Datum IDS from IBM) France and . Internal Auditor (CIA) and Dukandar started his career as and Honors in Accounting from Holding as well as Executive to launch a third operator to Certified Control Self Assessor an auditor with KPMG in 1996 the University of South Africa. Vice president of Vimplecom offer Internet services in Egypt (CCSA) with over 20 Years and subsequently worked with AHMED ABOUDOMA group for Asia and Africa until between 1996 and 1998. Mr. MOHAMED DUKANDAR of experience in governance, National Treasury, South Africa, Chief Executive Officer, 2014. Prior to that, he was Aboudoma holds Bachelor’s Chief Internal Control & Audit risk management, insurance, and City of Joburg. Mr. Etihad Etisalat (Mobily) CEO of Banglalink Telecom Degrees in Communications Officer, Etisalat Group internal/ external audit and Dukandar serves as a member

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VISION STRATEGY

Drive the digital future to In recent years, telecoms and adjacent industries have been in a state of flux on account of ongoing changes within the macro-economic empower societies environment and the increasing and evolving influence of digital developments. In light of this, the Etisalat Group has conceived a new vision supported by a bold corporate strategy to maximise shareholder value in this developing market landscape.

A Digitally-Powered Market in Flux With an international footprint that extends to 16 Underpinning the transformation of the Telecoms industry countries across Asia, the Middle East and Africa, Etisalat and in fact all industries is end-to-end digitisation, which Group operates in a wide array of macro-economic and influences telecoms operators both internally, in terms geo-political contexts. Whilst, the Group anticipates that of operating models, and externally, in terms of business GDP growth will remain solid for the foreseeable future in models and value propositions. This digital revolution countries such as the UAE, Morocco, Egypt and Pakistan, is enabling consumers to adopt increasingly tech-savvy volatile oil prices, currency devaluation, a slight slow- down in population growth across certain countries, and lifestyles, businesses to change the way they operate relative regional political instability present challenges and deliver value, and governments to offer ever-smarter that demand transformed business and operating models. solutions on the route towards truly smart governments The Group clearly requires a dynamic and adaptable and cities. corporate strategy in order to thrive in all of these varying contexts. This all-encompassing digital transformation provides the telecoms industry with significant growth opportunities. Added to this is the fact that the telecoms industry This is because the demand for high-speed and low-latency itself is undergoing unprecedented transformation, data, smartphones, digital solutions, and appealing content driven by various factors, including evolving across multiple digital channels is continuously increasing. technologies, new business models, changing customer In addition, due to the integration of cross-industry value behaviours, and the emergence of new over-the-top (OTT) competitors. These new factors can not be ignored chains in verticals such as the media, finance, healthcare, as they are slowly eating into the traditional core education and automotive sectors, digitisation is enabling telecoms services revenues, that retain a sizable portion telecom operators to play roles that are more significant in of the Group’s countries of operations. these adjacent industries.

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and Eastern Europe. Meanwhile, the Group will continue to A New, Digitally Inspired Vision explore opportunities to optimise its portfolio in order to balance Capitalising on the current digital wave, the Etisalat Group growth and shareholder returns. continues to transition from a traditional telecoms operator to an integrated ICT solutions provider. This is in parallel to the Grow B2B/Digital across the footprint To Drive the Digital steady digitisation of consumer needs in all of Etisalat’s markets. The Etisalat Group is already taking full advantage of the T Consequently, the Etisalat Group has taken this opportunity to aforementioned digital opportunities. This is evidenced by, among Future to Empower develop an overarching vision, which is both powerful and digitally others, Etisalat UAE’s recent establishment of Etisalat Digital, inspired: Drive the Digital Future to Empower Societies. Societies a dedicated unit that drives digital transformation by enabling enterprises and governments to become smarter. The unit has The Etisalat Group’s new vision will cement its industry-leading become a major contributor to incremental revenue growth position while embracing transformation by working toward the for Etisalat UAE operations. Going forward, Etisalat Digital will following aims: develop its unique competencies to extend across the Etisalat Accelerate value • Reshaping the lives of consumers; Group’s footprint to capitalise on the growing opportunities within A • Accelerating the economic growth of businesses; generation through innovation the region. • Enhancing the competitiveness of the countries in which the Group operates. and digitization Raise Capabilities and develop Talent across the Group The realisation of the Etisalat Group’s new vision and the With this new vision, the entire Group will be inspired to adopt execution of the associated strategy requires robust capability a more digitally oriented focus to align the strategic direction of Raise capabilities and develop and competence development. As such, the Etisalat Group will all operating companies, thereby taking full advantage of growth focus on enriching and developing a digitally aligned culture, R opportunities going forward. talent across the group enhancing collaboration both within and between operating companies, implementing effective succession management, A New Strategy for a New Vision facilitating the development and retention of existing In support of this vision, the Etisalat Group’s new “TARGET” talent, and initiating vigorous and efficient measures for the strategy highlights and rejuvenates the Group’s priorities, focus Grow B2B/Digital acquisition of new talent to meet the growing needs of the areas, direction, and ambitions within the following framework: G across the footprint digital world. Transform Operating Companies into Strongholds Accelerate Value Generation through Innovation The Etisalat Group will continue to provide strategic and and Digitisation operational support for all operating companies to maintain and As the rate of industry disruption picks up speed, the Etisalat Expand portfolio in MENA and improve their market positions by defending their core businesses Group will accelerate and enrich the development of its portfolio and enhancing digital capabilities. E knowledge economies of open innovation initiatives essential for competition in the digital world. A key principle of the Group’s innovation strategy The focus will be on driving excellence across sales and marketing, will be to maintain relevance with the core business as well as the IT/network, procurement, and regulatory agenda management. In relevant digital adjacencies. particular, the Group will actively manage customer experiences to offer an optimal balance between digital and traditional channels Transform Operating Companies As part of this, the Etisalat Group will adopt a range of open for a true omni-channel experience. End-to-end digitisation T innovation tools – such as scouting in major global innovation into strongholds will both complement and enable these focus areas, which will hubs, working more extensively with ecosystem partners including centre on key technologies, such as Big Data, artificial intelligence start-ups, and remaining open to different investment vehicles – and robotics. Collectively, these efforts will yield a portfolio of to fast-track the Group’s achievement of its ambitious objectives. stronghold operations that will maximise shareholder value. Revenue growth, digital capability development, customer experience improvement, and efficiency optimisation will serve as Expand portfolio in MENA and Knowledge Economies anchors for this strategy. The Etisalat Group’s new strategy will target inorganic growth opportunities through majority control of well-positioned operators within target geographies of Middle East, Africa, Asia,

24 25 ETISALAT GROUP | ANNUAL REPORT 2017

KEY EVENTS DURING 2017

February: for national roaming and international voice services; • Etisalat Received Tier III Gold Certification for Operational • Etisalat Group exited Nigeria; Sustainability • Announcement of the Federal Royalty scheme for the period August: 2017 to 2021. • Mobily signed 3-year framework agreements with Nokia, • Mobily awarded unified license from CITC to provide all telecom and to modernize its mobile network. services including fixed-line voice and internet services. September: March: • Etisalat launched new mobile brand “Swyp” targeting the • UAE ranked as global leader in Fiber Optic Network by youth segment in the UAE; FTTH Council • Etisalat launched the first IPX Exchange platform in the • Etisalat Group has been ranked as the most valuable telecom Middle East and Africa region to support IPX traffic exchange; operator in the Middle East by Brand Finance an integral part of Smart Hub services; • Etisalat ‘first telco in UAE’ to achieve ISO 20000 certification. • Etisalat Misr launched 4G services in Egypt;

April: October: • E-Vision partnered with MBC GROUP in Exclusive IPTV/OTT • Etisalat successfully completed the fastest 5G live trial Channel Distribution Rights deal in the UAE globally reaching 71 Gbps during GITEX • Inauguration of Saudi Arabia’s first smart city in Yanbu in collaboration between the Royal Commission of Yanbu and November: Company, Mobily’s subsidiary • Etisalat successfully completed the first MENA IPTV service on 4G network May: • PTCL signed a data center hosting agreement with 1LINK • Credit Rating Agencies Standards & Poor’s and Moody’s Guarantee, a Pakistani national payment network for ATMs affirmed Etisalat Group’s high credit rating at AA-/Aa3 with and POSs. stable outlook; • Etisalat and Ericsson successfully conducted a 5G trial with December: outdoor mobility. First 5G trial with outdoor mobility in the • Etisalat successfully deployed the first regional pre- region that achieved aggregate site throughput of greater commercial 5G than 24 Gbps. • Maroc Telecom awarded the “Best Mobile Network in • Etisalat UAE launched ‘Smiles’ Customer Engagement Program. Morocco” Prize for 2017 and won the Vigeo-Eiris “Best EM • Maroc Telecom launched a “Datacenter Hosting” service Performers” award for in the category of companies achieving aimed at its corporate customers. the best CSR performance among emerging countries • Etisalat unveiled ‘Open Innovation Center’ to showcase June: Smart Solutions and Drive Digital Transformation; Center • Mobily acquired additional spectrum 2X5 MHZ block in the to help drive digital transformation by enabling the use of 1800 MHZ band; latest technologies • Etisalat Misr and signed commercial agreements

26 27 ETISALAT GROUP | ANNUAL REPORT 2017

OPERATIONAL HIGHLIGHTS

Subscribers EBITDA Aggregate subscribers reached 142 million in 2017 resenting a net addition of 0.4 million subscribers. eLife Group Consolidated EBITDA amounted to AED 26.0 Pound against Dirham and competitiveness of the reflecting a net addition of 0.7 million during the last segment continued to drive consistent growth with 5% billion representing a year-over-year decline of Moroccan operations. 12 month period on a like for like basis (after exclud- year on year increase to over 1 million subscribers. Total 1% in 2017, while EBITDA margin remained stable ing subscriber numbers in Nigeria from last year). The broadband segment grew by 2% year on year to 1.1 at 50%. EBITDA growth is negatively impacted by In Maroc Telecom’s consolidated EBITDA grew year- 2017 net gain in the year was mainly a factor of strong million subscribers. unfavourable exchange rate movements in Egypt, on-year by 3% to AED 6.5 billion with EBITDA margin subscriber growth in the UAE, Morocco, Ivory Coast, competitiveness pressure in Morocco and non-tele- 2017 increasing 2 points to 51%. In local currency, EBITDA Benin, Togo, Niger, Egypt and Afghanistan. 142 Maroc Telecom Group’s subscriber base reached 57.0 com operations. in absolute terms increased by 1% due to international MILLION million customers in 2017, representing a year over operations that grew by 8% offsetting the 2% decline AGGREGATE 26.0 In the UAE the active subscriber base grew to 12.6 SUBSCRIBERS (MN) year growth of 6%. This growth is attributable to the In the UAE, EBITDA in 2017 grew year-over-year by BILLION in Morocco. In Egypt, EBITDA declined year-over- million subscribers in 2017 representing a year on year domestic and international operations. In Pakistan, 2% to AED 16.7 billion resulting in EBITDA margin year by 28% to AED 1.0 billion while maintaining EBITDA growth of 3% driven by strong performance of mobile 2016 subscriber base was stable at 21.9 million impacted of 53%, at comparable level to prior year. EBITDA (AED BN) EBITDA margin stable at 39%. EBITDA was impacted and eLife segments. The mobile subscriber base grew by the higher competition facing EVO product from impacted by higher interconnection and termination by unfavourable foreign exchange rate movements year on year by 3% to over 10.8 million subscribers rep- 141 mobile operators. costs, terminal costs and marketing expenses. 2016 and inflationary pressure that impacted operating MILLION costs. EBITDA continued to improve in local currency Revenues EBITDA of International consolidated operations in 26.3 driven by enhanced revenue trend. In Pakistan EBITDA BILLION 2017 decreased by 4% to AED 9.0 billion contributing decreased year over year by 1% to AED 1.4 billion with Etisalat Group’s consolidated revenue declined 1% to AED In Maroc Telecom consolidated revenue for 2017 amount- 35% to Group Consolidated EBITDA. This decrease is EBITDA margin stable at 34%. This decrease is mainly 51.7 billion in 2017 impacted by unfavourable exchange ed to AED 12.6 billion representing a stable year over year attributed to unfavorable movement in the Egyptian due to higher interconnection and termination costs rate movements mainly in Egypt. In constant currencies, growth attributed to stringent regulatory environment in and higher staff costs as compared to prior year. year over year revenue growth was 2%. mobile segment in the Morocco due to the re-establish- ment of a 20% asymmetry on mobile call termination rates Net Profit and EPS In the UAE, revenue grew year on year by 3% to AED as from the beginning of March 2017 and the decrease of 2017 Consolidated net profit after Federal Royalty grew by On 20 February 2018, the Board of Directors proposed 31.2 billion, as a result of growth of the subscriber base incoming international revenue due to the deregulation of 0.3% to AED 8.4 billion resulting in profit margin of a final dividend for the second half of 2017 at the rate especially in the eLife segment driven by customers IP telephony as from November 2016. In Morocco, revenue 16%. Net profit was impacted by higher share of losses of 40 fils per share, bringing the full year dividend to uptake of premium content and higher speed packages, 51.7 in local currency decreased by 3.6% attributed to the BILLION from associates and higher royalty charges. 80 fils per share. This proposal is subject to sharehold- increase in handsets sales due to enrich device portfolio mobile segment while international operations grew year- REVENUES 2017 er approval at the Annual General Meeting scheduled with new exclusive deals, increased offering of business (AED BN) on-year by 2.7%, resulting in 45% contribution to Maroc Earnings per share (EPS) amounted to AED 0.97 for the on 21 March 2018. solutions, digital and ICT services, and increase in Telecom Group’s consolidated revenue. full year of 2017. 2016 8.4 wholesale segment. NET PROFIT (AED BN) In Egypt, revenue declined by 38% to AED 2.5 billion, due 0.97 Revenues of International consolidated operations for 52.4 to unfavourable exchange rate movements of Egyptian EPS (AED FILS) 2017 declined year-on-year by 7% to AED 20.0 billion BILLION Pound against AED. In local currency, revenue growth was negatively impacted by the unfavourable exchange rate 17% mainly attributed to growth in the data segment, 2016 movements in Egypt in addition to competitive pressure new pricing of scratch cards, higher international incoming of mobile segment in Morocco and fixed segment in Paki- revenue and handsets sales. In Pakistan, revenue for 2017 8.4 stan. Revenues from International operations represented was AED 4.1 billion, a decline of 1% from the prior year. NET PROFIT (AED BN) 39% of Group consolidated revenue. Revenue impacted by lower usage and lower revenue from 0.97 EVO due to competition from mobile operators. EPS (AED FILS)

28 29 ETISALAT GROUP | ANNUAL REPORT 2017

OPERATIONAL HIGHLIGHTS

CAPEX Profit and Loss Summary Consolidated capital expenditure decreased by 23% Capital expenditure in Morocco increased year over year to AED 8.0 billion resulting in capital intensity ratio of by 18% due to the acceleration of roll-out of high speed )AED m( 2016 2017 16%, 5 points lower than prior year. Adjusting for cost networks with 4G coverage reaching 93% of population. Revenues 52,360 51,666 of licenses, capital expenditures would have declined by Capital expenditure of international operations decreased 1% and capital intensity ratio would have been stable year over year by 11%. In Egypt, capital expenditure EBITDA 26,283 25,977 at 15%. decreased year-on-year by 75% to AED 0.7 billion EBITDA Margin %n 50% 50% 2017 resulting in a capital intensity ratio of 27%. This decrease Federal Royalty )5,010( )6,039( In the UAE, capital expenditure in 2017 decreased by in capital spending is attributed to prior year acquisition 16% to AED 3.0 billion while capital intensity ratio 8.0 of 4G license and virtual fixed-line service license. Net Profit 8,421 8,444 BILLION decreased 2 point to 10%. Capital expenditure was Adjusting for the cost of license from prior year, the year Net Profit Margin % 16% 16% CAPEX committed to mobile network modernization, building (AED BN) on year decline in capital spending is 6% and capital digital and ICT capabilities and store rollout. intensity ratio is higher by 9 points. Pakistan operations 2016 capital expenditure was AED 1.1 billion, down 5% year Balance Sheet Summary Capital expenditure in consolidated international on year and capital intensity ratio of 25%, 1 point lower operations amounted to AED 4.9 billion, a decrease of than 2016. The increase in capital spending focused on 10.5 )AED m( 2016 2017 28% from year 2016 level. In Maroc Telecom Group, BILLION fixed network transformation programme. capital expenditure increased year on year by 7% to AED Cash & Bank Balances 23,676 27,125 3.2 billion resulting in a capital intensity ratio of 25%. Total Assets 122,521 128,284 Total Debt 22,279 24,705 DEBT Net Cash / (Debt)t 1,398 2,420 Total consolidated debt amounted to AED 24.7 billion More than 61% of the debt balance is of long-term Total Equity 55,915 57,704 as of 31 December 2017, as compared to AED 22.3 maturity that is due beyond 2019. Currency mix for billion as at 31 December 2016 an increase of AED 2.4 external borrowings is 42% in Euros, 28% in US billion. Dollars, 12% in MAD and 18% in various currencies. Cash flow Summary

As at 31 December 2017, the total amounts issued Consolidated cash balance amounted to AED 27.1 )AED m( 2016 2017 2017 under the global medium term note (GMTN) pro- billion as of 31 December 2017 leading to a net cash Operating 18,926 20,306 gramme split by currency are US$ 1.4 billion and Euro position of AED 2.4 billion. 2.4 billion, representing a total amount of AED 15.5 24.7 Investing )9,361( )7,567( BILLION billion. Consolidated debt breakdown by operations as Financing )7,726( )9,027( DEBT of 31 December 2017 is as following: (AED BN) Net change in cash 1,839 3,712

• Etisalat Group (AED 16.1 billion) 2016 Effect of FX rate changes 355 )288( • Maroc Telecom Group (AED 4.4 billion) Reclassified as held for sales 60 25 • Etisalat Misr (AED 2.7 billion) 22.3 Ending cash balance 23,676 27,125 • PTCL Group (AED 1.5 billion) BILLION

30 31 ETISALAT GROUP | ANNUAL REPORT 2017

ETISALAT’S GREATER ETISALAT MOST VALUABLE EMPHASIS ON BRAND BRAND IN MENA REGION WITH BUILDING INITIATIVES A VALUE OF USD 7.7 BN

Brand Finance, the world’s leading independent branded the space of digital Further Improvement In 40 Years, 16 Countries, Together As One Etisalat and Manchester City Football Club: business valuation firm, has ranked Etisalat as the Most infrastructure, Brand Rating

Valuable Brand in Middle East and North Africa region. entertainment and Etisalat has come a long way. Over its 40-year journey starting Football connects us Etisalat brand value has grown to $7.7 billion - higher than smart cities. The in the UAE, the company grew to become a multinational Etisalat’s sponsorship as Official Telecommunications Partner of AAA- any other brand in the MENA region. The only telecom brand has smartly AA+ telecommunications services provider that connects people Manchester City Football Club endeavors to reach and engage fans provider from the region to break the US$7 billion brand leveraged today’s across 16 countries every day. across its markets and fulfill Etisalat’s vision through sport. value mark, Etisalat brand value jumped by 40%. scale for tomorrow’s 2017 2018 agile society. To commemorate Etisalat’s history and showcase its pioneering Football, being the most watched and played sport in the world, On a portfolio basis, when we include the brand value of non- spirit, Etisalat launched its first ever group brand campaign serves as a common thread that can link Etisalat’s footprint branded subsidiaries, the brand value has jumped by 25% to As the premier digital and telecommunications partner of Dubai called ‘Together as One’. countries. Its international impact is visible through the success of USD 9.6 Bn. Expo2020, Etisalat is set to deliver one of the fastest, smartest professional football leagues in Europe including the popular and and best-connected places on earth during the global mega event. In addition to appealing to the nostalgia of Emiratis and expats widely followed English Premier League. Etisalat’s brand value has grown over the year due to innovative Through its digital infrastructure expertise, Etisalat is poised to alike who grew up with Etisalat in the UAE, the campaign customer service driven strategy, adapting well to digital savvy bring the Expo themes to life. also speaks a more international language of togetherness by marketplace, leadership position on the 5G revolution, successful highlighting Etisalat’s footprint across 16 countries. launch of global brand building initiatives and renewed support The brand is behind the infrastructure digitization of first of for global football sponsorships with further focus on its its kind Dubai Parks and Resorts project. This included digital Throughout the campaign, a hand gesture made by the diverse partnership with Manchester City Football Club. channels, different smart services such as smart parking, smart people featured in the campaign’s communications is always ticketing, connected transportation and connected food and visible. This signature hand gesture forms the Etisalat logo, an Persistent Brand Value Growth 7,702 With its overall beverage. element that highlights the spirit of togetherness through Trend (USD, Million) strategy focused on shared human experiences. 5,512 ‘Driving the Digital On retail innovation front, Etisalat amplified roll out of its 3,797 Future’. Etisalat is smart stores. This new concept focuses on transforming a brick The first phase of campaign, celebrating Etisalat’s journey in the Manchester City is a top-tier club that currently leads the English working on several and mortar retail environment to a fully digital and seamless UAE launched with overwhelmingly high reach across the country, Premier League and competes among the best in Europe and the digital initiatives in experience for customers making interactions effortless. partly indicated by millions of impressions and views on digital world. The club’s drive to innovate the sport of football connects 2016 2017 2018 channels, as well as positive word of mouth and ad likeability seamlessly with Etisalat’s vision to drive the digital future. across Emirati and expat segments. Etisalat Ranks As Etisalat heavily activated its Manchester City sponsorship through MENA’s Most Valuable various initiatives including key advertising campaigns featuring Brand 2018 first team players, as well as rebranding of its phone booths in the

UAE and areas of its headquarters. EUROPE NORTH AMERICA ASIA

Etisalat also collaborated with Manchester City to bring a flagship piece of digital content to football fans featuring exclusive behind the scenes footage straight from the tunnel of Manchester City’s stadium, as players and members of Manchester City and opposing teams go on and off the football NORTH AFRICA AUSTRALASIA pitch during matches. Source: Brand Finance Global 500, 2018 MIDDLE EAST & AFRICA

32 33 ETISALAT GROUP | ANNUAL REPORT 2017

Afghanistan Morocco

Pakistan ETISALAT GROUP’S Morocco FOOTPRINT Egypt

Saudi Arabia UAE

Mauritania

Mali Niger

Burkina Faso

Ivory Coast Sri Lanka Republic Togo Benin

Gabon

Operator Etisalat PTCL / Ufone Moov Gabon Telecom Country United Arab Emirates Pakistan Benin Gabon Mauritania Licence Type Mobile, Fixed and Internet Mobile, Fixed and Internet Mobile Mobile, Fixed and Internet Mobile, Fixed and Internet Etisalat Ownership 100% 23% 48% 25% 20% )Popluation (Million 9 197 11 2 4 Penetration Mobile 225% Fixed 27% Mobile 71% Fixed 1% 81% 166% 114% Numbers of Operators 2 Mobile 4, Fixed 11 4 3 3 Operator Etislat Misr Thuraya Etisalat Onatel Moov Moov Country Egypt United Arab Emirates Sri Lanka Ivory Coast Niger Licence Type Mobile and Internet Satellite Telecommunication Mobile Mobile, Fixed and Internet Mobile Mobile Etisalat Ownership 66% 28% 100% 25% 41% 48% )Popluation (Million 98 21 19 24 21 Penetration 110% 136% Mobile 88% 114% 41% Numbers of Operators Mobile 4 Satellite 4 Mobile 5 3 4 4 Operator Etihad Etisalat (Mobily) Etisalat Maroc Telecom Moov Moov Country Saudi Arabia Afghanistan Morocco Central African Republic Tago Licence Type Mobile, Fixed and Internet Mobile Mobile and Fixed Mobile Mobile, Fixed and Internet Mobile Etisalat Ownership 28% 100% 48% 48% 25% 87% )Popluation (Million 33 36 35 5 18 8 Penetration 139% 79% Mobile 127% Fixed 6% 38% 108% 71% Numbers of Operators Mobile 3 Mobile 4 3 4 3 2

34 35 ETISALAT GROUP | ANNUAL REPORT 2017

UNITED ARAB EMIRATES

2017 was another successful year for Etisalat UAE; it Furthermore, Etisalat UAE continues to leverage its wide fibre unequivocally demonstrated Etisalat’s strategic focus coverage to drive the adoption of high-speed triple play packages and serious commitment towards digital transformation, and to migrate customers from legacy copper-based services. In innovation, and customer centricity. It also reaffirmed the areas where fibre is not yet available, Etisalat has successfully company’s determination when it comes to harnessing completed the trial of IPTV over Fixed LTE connections, which are the power of technology for the benefit of customers and used to bring the eLife TV content to customers. businesses. In this way, Etisalat UAE sustained its technological and market leadership, while enabling the development of a In terms of distribution, Etisalat UAE continued its focus on truly digital society. innovation and the enhancement of the customer experience across all channels in 2017. It proceeded with upgrades to its Commercially and in the mobile segment, Etisalat continued to retail network to realise the “Smart Store” concept. Smart Stores pursue a differentiated approach, which transforms all aspects of feature improved ergonomic store design, paperless transactions, the customer value proposition – from products and services, to digital screens, product zones with dedicated experts, and smart distribution and care channels, to experience and engagement. queuing systems. Etisalat has now more than 119 Smart Stores, The drive behind the launch of the SWYP sub-brand acknowledged which are helping to reduce the waiting time and contributing the emergence of digital-only segments and catered to the young towards further improvement of Customer experience, in the UAE. “digital natives” demographic. In 2017, Etisalat UAE unified its existing engagement platforms Etisalat UAE also launched mobile combos and various mobile (Deal of the Day, Etisalat Rewards, Etisalat Marketplace, and data tariffs and promotions, both for local and roaming business. Etisalat Wednesdays) under a single rewards programme, “Smiles“. At the same time, the company expanded its devices portfolio to A major milestone in enhancing customer engagement, the Smiles include the most desired smartphones, tablets, smart watches, platform aims to augment Etisalat customers’ lifestyles through and connected cameras from multiple vendors. This portfolio a range of offers and discounts from 200+ partners, available in strategy, combined with the widest retail presence in the 1 500+ outlets. country, has supported and increased Etisalat’s revenue resilience to changes in consumer consumption. It has also reasserted With the customer in mind, Etisalat UAE is revamping and Etisalat’s position as the operator of choice for smart devices in promoting the adoption of its digital and self-service touch points the UAE. (website, self-care mobile app, and payment terminals), in order to assure a consistent end-to-end experience. It also continues With regard to fixed consumer services, Etisalat reinforced to see a steady decrease in complaints-related calls, driven by eLife’s position as the UAE’s favourite family entertainment programmes to systematically reduce avoidable complaints, platform with the commercial launch of the company’s 4K TV increase the resolution rate in the first contact, and increase service. To the same end, Etisalat UAE continued to invest in adoption of self-service channels. enriching its content offerings by bringing the best of regional, global, linear, and on-demand content. In this way, the In 2017, Etisalat UAE took large strides toward fostering open company caters to the various segments’ needs. This focus on innovation and embedding it into the corporation’s products superior content propositions is driving the uptake of premium and services. Collaborating with Dubai Future Accelerators (DFA) packages, with a positive impact in average revenue per user for start-up businesses resulted in the launch of two challenges (ARPU) development. pertaining to health and digital security risks throughout the year.

36 37 ETISALAT GROUP | ANNUAL REPORT 2017

AED AED AED

10.8 MILLION 1.0 MILLION 1.1 MILLION 31.2 AED 16.7 AED 53% 8.2 AED 3.0 AED MOBILE SUBSCRIBERS eLIFE SUBSCRIBERS FIXED BROADBAND SUBSCRIBERS BILLION REVENUE BILLION EBITDA EBITDA MARGIN BILLION NET PROFIT BILLION CAPEX

The partnership supported Etisalat’s innovation strategy. It also and applications. Etisalat is now positioned as the UAE’s preferred Moving to Wholesale business, in which Etisalat has managed Etisalat UAE also successfully launched the AAE-1 cable system played a role in the appointment of the company as the digital M2M and IoT provider, with over half a million people connected to strengthen its position as one of the key global wholesale (Asia-Africa-Europe), which is the largest submarine cable transformation partner for Dubai International Financial Center’s SIMs on its IoT platform, covering key governmental and smart brands. In 2017, it became one of the Top 10 voice carriers system to be developed in more than a decade, in 2017. It (DIFC) FinTech Hive, the region’s first financial technology city essential services. Within this context, Etisalat UAE has globally. It now carries around 16 Billion minutes and provides was developed in cooperation with 18 other global carriers, accelerator programme. Moreover, in late December, the successfully enabled connected business vehicles with the high-quality call termination to more than 750 international including two Etisalat Group’s operating companies – PTCL and company launched the Etisalat Digital Open Innovation Center, launch of M2M in-vehicle Wi-Fi, and launched M2M ruggedised fixed and mobile networks in Africa, Asia, MENA, Europe and Mobily. AAE-1 links all major Asian, African, Middle Eastern which showcases the latest digital solutions and how they can handhelds as an end-to-end solution, comprising M2M managed the Americas, through more than 150 direct interconnects and European regions, providing the lowest latency connections be incorporated into government and businesses to enable a connectivity, devices and comprehensive hardware support with across all continents. It does so by using state-of-the-art between these regions. With the launch of AAE-1, Etisalat smarter today. flexible payment plans. technologies, including a dynamic routing engine and quality currently has the capability to activate more than 8Tbps of monitoring systems. Furthermore, Etisalat made great strides capacity to Asian and European regions and has expanded Innovation in the payment space was demonstrated with the Moreover, Etisalat UAE continues to operate as the trusted partner in the mobile wholesale market and become the preferred its direct reach to new markets, such as Vietnam, Cambodia, launch of the Etisalat Wallet, which allows customers to make for governmental entities in light of its dense infrastructure provider of many mobile services including SMS-hubbing, IPX Thailand and Myanmar. purchases, pay bills, or recharge prepaid lines conveniently and and robust network and solutions. It has collaborated with Abu services, signalling of 2/3/4G, GRX, and roaming replicator securely, using one simple application. Additionally, Etisalat UAE Dhabi National Oil Company (ADNOC) in order to implement a service, along with other value-added services (VAS). Etisalat Etisalat UAE’s infrastructure and smart network investments is already enabling 100+ millions of third-party transactions via smart surveillance and security solution across all ADNOC’s petrol also enhanced its global positioning in the A2P SMS wholesale remained the competitive edge that underpins all of the above carrier-billing agreements with all major platforms, including the stations in the country. It is also collaborating with Dubai Civil market by connecting more directs, including a large number accomplishments and supported the company in its various Android store and Apple iTunes Store for app, music and e-book Defense to introduce a smart monitoring system for homes in of carriers, Mobile Network Operators (MNOs), aggregators and strategic endeavours and market advances. The evolution of this purchases. Dubai. Additionally, the company is joining forces with the Dubai over-the-top (OTT) players. hinges on clear strategic pillars that maintain a delicate balance Municipality to replace the traditional paper ticket with smart between building for the digital future, modernising existing When it comes to embracing and promoting Artificial Intelligence phone ticketing, in addition to deploying other state-of-the-art Etisalat UAE also continued to expand its roaming network network, and enhancing customer experience and network (AI) and Robotics, 2017 was an exceptional year for the UAE digital solutions across multiple recreational facilities operated globally, reaching more than 790 roaming partners and, on the operational efficiencies. in general and Etisalat specifically. It generated massive by the Dubai Municipality. It is also collaborating with the Dubai LTE front, the company established connectivity with over 300 momentum with its drive to adopt robots for process efficiency Health Authority (DHA) on a smart application that will reduce the operators in more than 110 countries. Furthermore, some value- During Gitex 2017 event, Etisalat UAE was the first operator and compliance enhancement, and the launch of a dedicated response time for stroke and heart attack patients. added services like SS7 Firewall, SS7 Steering, and SS7 Analytics in the Middle East and North Africa (MENA) region to AI programme to test possible use cases for business benefits. were recently introduced to offer additional tools to MNOs to demonstrate a 5G live trial with download speeds of over 71 Positive outcomes have already emerged and many more will Beyond this, Etisalat continues to offer advanced managed manage and protect their international roaming businesses. Gbps. This stems from the company’s belief in the importance surely follow. Etisalat UAE’s plan is also to cover areas pertaining services solutions for reputable institutions in health and banking, of 5G technology in fuelling Gigabit Mobile Broadband to customer interactions, using Chabots and other AI tools to while offering new and novel high-throughput satellite services Etisalat SmartHub continues to be the de facto gateway to the in addition to critical and mass Internet of Things (IoT). leverage company capability and support in delivering quality, to address business segments in remote locations or harsh world and is serving as the region’s most connected and credible Moreover, Etisalat UAE made considerable progress on its highly customised services efficiently. With its deep understanding environments. Moreover, the new Secure Cloud Wi-Fi delivers the IP exchange. It provides peering, IP transit services, Ethernet- path toward virtualisation, with the launch of the Etisalat of future trends and industry changes, Etisalat UAE is confident power of visibility and automation. It is a first-of-its-kind solution managed services, Ethernet exchange, firewalls, and a universal Telco Cloud, making the company the first operator in the of its ability to succeed in the AI journey, just as it did in the in the UAE that targets small to medium businesses (SMB) and connectivity hub to all types of customers including CSPs, content region to virtualise the mobile core for consumer data traffic, Machine-to-Machine (M2M) and IoT space. The company has enterprise customers, allowing them to manage their wireless IT providers and CDNs. The number of Etisalat UAE’s customers virtualising the customer premises equipment (CPE), and the invested in platforms, command centres, and people in order to infrastructure centrally from The Cloud, through a state-of-the-art and partners continues to grow. Etisalat engaged in partnership Business CPE via the Soft VPN Service. This has planted seeds serve the current M2M connectivity and management needs and web-based dashboard. with major content providers to localise their content via Etisalat for the growth of agile products and services capable of self- to be the cradle for the upcoming explosion in IoT requirements SmartHub, thereby dramatically improving customer experience. care and auto-healing.

38 39 ETISALAT GROUP | ANNUAL REPORT 2017

Meanwhile, Etisalat UAE continued to invest heavily in its • The company received Tier III gold certification from globally mobile network modernisation and expansion efforts last year. recognised data centre authority, the Uptime Institute’ for This enabled it to provide best-in-class mobile service and to Operational Sustainability for Etisalat’s Khalifa City Data be ready for the ever-increasing growth in data traffic. Within Centre in Abu Dhabi. This is an acknowledgement of the the same context, the company commercially launched its highest level of operational excellence. Etisalat is the first VoLTE services to enhance customer experience and quality of provider in the MENA region to acquire the certificate. E-VISION service. Over one million smart devices are now provisioned to enjoy VoLTE services with clear voice quality, HD voice, video • Similarly, Frost and Sullivan named Etisalat the best “UAE calling, and swift-call connectivity. Attention was also given Third Party Data Centre Services Company 2017”. The to coverage in rural and newly developed areas, in addition to award demonstrates Etisalat’s efforts to provide the best Since its inception in 2000, E-Vision has been a pioneer in Year 2017 witnessed several achievements. E-Vision executed a critical locations. In this regard, strong emphasis was placed on services with respect to Data centre security, compliance, the media industry in the region, starting with cable Pay TV strategic partnership with MBC Group, securing multiple rights new mega-projects, malls, commercial buildings, and residential performance, user experience, and connectivity. services in the UAE. E-Vision has been a key contributor to the and services that enhance the quality of E-Vision services. towers. The company also owns the UAE’s biggest public Wi-Fi development of the Pay TV industry. During the initial decade, hotspots network – an outcome of Etisalat’s smart connectivity • Etisalat SmartHub won the Excellence in Regional & Global the company targeted the business-to-consumer (B2C) Pay TV From a channels line-up perspective, E-Vision Pay TV partners initiatives, which were also served as the impetus for the Datacenter Connectivity award from Data Centre Dynamics business segment. After their success in the initial period, and enriched their linear channels offering by integrating 4K channels provision of managed Wi-Fi service for over 417 schools in Dubai 2017. the launch of the Etisalat FTTH infrastructure and eLife Services and a number of new channels rights secured during the year. and various Northern Emirates, and 313 indoor access points at (Triple Pay offering), E-Vision underwent a business model Pay TV partners end-user base can now enjoy leading and cutting Abu Dhabi University. Etisalat UAE is committed to the realisation of its digital vision. transformation by moving from a B2C to a B2B business model. edge programming with the quality and customer experience The company is highly adaptive to industry and market changes, in E-Vision became a content aggregation powerhouse, enabling of 4K technology. Additionally, E-Vision extended its strategic In addition, network plans were augmented with soft initiatives addition to changes in consumer behaviours and it will continue entities to provide Pay TV services to end users. E-Vision clientele partnership with Fox Network by securing the rights for 3 new targeting the digitisation of the workforce. Etisalat UAE strives to to drive value and deliver best-fit options. Moreover, Etisalat UAE includes several Etisalat Group entities, as well as entities not exclusive channels (Fox Crime HD, Fox Life HD and Fox Rewayat) empower field staff and customers with the right tools to enable is aware of the revolutionary impact of artificial intelligence and associated with the Etisalat Group. in addition to the existing Fox Family Movies HD, Fox Action faster and more convenient service delivery. As such, the company the need to contribute positively to this wave, while expanding Movies HD and Fox Life HD. is paving the way for Do-It-Yourself (DIY) service delivery routes the breadth of its offerings beyond traditional telco services, E-Vision has focused on addressing the needs of the multi-cultural that come with great benefits. The Plug & Play eLife Service is through the smart monetisation of the company’s big data demographics of the UAE and MENA region by aggregating Overall, E-Vision SVoD offerings include its in-house SVoD one example of this feature and many more such innovations will platforms and virtualised network. the most compelling TV/content offering, including a range of service as well as strategic partnerships with leading players (e.g. follow in the near future. channels, from free-to-air, premium and in-house developed TV StarzPlay). Currently, E-Vision provides more than 10,000 hours channels. Pay-per-view or transaction on demand (TVoD) has of premium content (1st and 2nd run series and movies) catering to Ultimately, Etisalat UAE’s success in 2017 was crowned by been a core offering of E-Vision, enabling access to premium the different segments of the markets. earning numerous awards and accolades, amongst which was events and/or TV movies. Additionally, E-Vision in-house channels, the Hamdan Bin Mohammed prestigious “Innovation Idea in eJunior and eMasala, have been a great success in enriching the To further enhance the SVoD service, E-Vision executed another Program Management” Award for the successful management and viewership, whilst acknowledging market and cultural affinity. strategic partnership with Hollywood Studios, Walt Disney completion of the Dubai Parks and Resorts project. and Sony Pictures that secured content rights for second Pay E-Vision has cemented long-lasting relationships with the major TV windows for E-Vision SVoD service, enriching the premium Moreover, Etisalat received international recognition for its unified international and regional broadcasters, as well as with the major catalogue for our Pay TV partners. communication and collaboration solutions at the Global Telecoms Hollywood and Bollywood Studios, and production entities. Business (GTB) Awards held in London. Meanwhile, the company’s E-Vision continued to improve customer experience during data centres were certified and recognised by various renowned Today, E-Vision is the largest content aggregator in the region. Ramadan, securing numerous premium TV series, including Day institutions: This leading position is driven by several factors, among which are: and Date (D&D) in our SVoD offering. • diversification and depth of content aggregation services • Etisalat UAE achieved SAP certification for its data centres provided to Pay TV operators across multiple genres and Despite the challenging environment in the TVoD market globally, and cloud services in the UAE. The company’s business-to- market segment ethnicities (Linear and VoD) E-Vision continues to perform well and its catalogue is the most business (B2B) customers in the UAE are now be able to host • increasing the service offerings, including larger number dynamic and attractive in the region, carrying an average of 700 their SAP application in Etisalat’s Data Centre and utilise of linear channels (FTA and Premium), Transaction-on- titles per month, including blockbuster and D&D titles. Etisalat’s OneCloud service, which duly fulfils all necessary Demand (TVoD), Subscription-on-Demand (SVoD), Content E-Vision’s strategic direction aims to be the most compelling, requirements of security, performance, data residency and Servicing, etc. efficient and platform-agnostic content aggregation company operational processes within the region. • Increasing the customer base and partnerships in the region, enabling Pay TV operators with the richest content offering & turnkey solutions.

40 41 ETISALAT GROUP | ANNUAL REPORT 2017

SAUDI ARABIA

SAR SAR

11.4 SAR 3.6 SAR 32% 2.3 SAR BILLION REVENUE BILLION EBITDA EBITDA MARGIN BILLION CAPEX

2017 was a challenging year for the Saudi telecom sector, given to cope with Mobily’s current maturity level as well as its future the macro weakness, regulatory challenges, tough competition, challenges. It covers several supporting areas related to common increasing pressure on consumer purchasing power, and slower procurement initiatives, digital transformation, knowledge sharing, population growth. Mobily, nevertheless, met these challenges and benefit from the Group’s economies of scale. head-on, employing a combination of strategic partnerships, a new strategy, and innovative products and services. In 2017 Mobily and Ericsson signed an agreement for central office transformation and modernisation that will allow Mobily Mobily began the year by introducing the company’s new strategy staying abreast of the latest telecom and IT technologies, and “RISE”. This strategy focuses on strengthening the company’s provide cutting-edge services to its customers. Furthermore, the foundations, providing excellent customer experience, and company awarded a contract to Cisco Systems, to modernise its delivering world-class overall performance. enterprise and data centre networks. The deployment of Cisco’s next-generation network solutions is a major step towards Mobily’s In February, Mobily achieved another major milestone by obtaining evolution toward full software-defined networking infrastructure. the unified license to provide all licensed telecommunication services, including fixed-line voice and internet services, in the Further to this end, Mobily signed an agreement with various country. This universal licence enhances the competitive strength major international telecom and IT suppliers (Nokia, Huawei of the company, placing it on an equal footing with other and Ericsson) to develop its mobile network in different regions operators in the sale of fixed-line and mobile solutions to the around the Kingdom. This project, the largest of its kind in the lucrative corporate segment. history of the company, has an aggregate value of SAR 2.4 Billion. Additionally, in June, Mobily successfully acquired a 2x5 MHz Over the course of the year, the company commenced and block in the 1800 MHz band through its participation in the extended new and existing partnerships with several key Communications and Information Technology Commission auction. industry players. For instance, by signing a five-year cooperation agreement with the Al Madinah Al Munawarah Development Finally, Mobily’s strategy to support digital transformation, Authority to serve and provide the latest technical services to the comply with the Kingdom’s 2030 Vision, and provide the latest city’s residents and visitors, Mobily further entrenched its status technical solutions for the business sector. As part of this, Mobily as a leading provider in this region. and Machines Talk Co signed a strategic partnership agreement , allowing Mobily to provide several smart and innovative products Mobily also commenced a new technical services and support and services like fleet and asset management to satisfy the needs agreement with Etisalat Group in 2017. The agreement is designed of both the government and private sectors.

42 43 ETISALAT GROUP | ANNUAL REPORT 2017

EGYPT

EGP EGP

12.1 EGP 4.7 EGP 39% 3.3 EGP BILLION REVENUE BILLION EBITDA EBITDA MARGIN BILLION CAPEX

Etisalat Misr moved closer to becoming Egypt’s leading telecom In addition, in keeping with Etisalat Group’s vision to drive the operator, rising to meet various challenges – including the digital future, Etisalat Misr accelerated the implementation of entrance of fourth mobile operator to the market and the intense its digital transformation programme. This programme extends pressure resultant of increasing inflation. The company’s careful customer value through digital channels, offers a more integrated and pragmatic strategy leveraged its assets, market position, unified experience, and promotes the development of new emerging digital technology, and invested in 4G network. products and services that better meet customers’ needs.

In 2017, Etisalat Misr faced increasingly intensified market Etisalat Misr’s push into the digital realm in 2017 also saw the competition with the entry of a fourth mobile player into an introduction of 3 new customer-centric services: The “My Etisalat” already saturated market. Nevertheless Etisalat Misr turned app enables customers to view their bundle consumption, pay bills, challenges into opportunities, reaffirming its leadership of the request support, tariff opt in, migrate numbers, and much more. ; industry. Etisalat Misr also signed a five-year national roaming Etisalat Misr’s e-store sells smartphone devices and the option to agreement with Telecom Egypt to provide 2G, 3G and 4G mobile reserve and buy deals online; and M-Wallet allowing customers to services over Etisalat Misr’s existing network. In addition, Etisalat honour their monthly allowance commitments. Misr will receive payment on International voice calls made via the Telecom Egypt’s International Gateway . Meanwhile, the For the corporate segment, Etisalat Misr capitalised on its company also began working toward becoming a fully integrated business applications and state-of-the-art data centres to provide telecom operator, given the Virtual Fixed License. an advanced solutions portfolio to support clients’ business enterprises. EM expanded its direct and indirect sales channels, Notably, Etisalat Misr obtained spectrum in the 900MHz and integrated and geographically distributed mega agents, and 1800MHz bands, which relieved 2G and 3G congestion and implemented smart sales key performance indicators to reward supported 4G services. This enabled EM to expand 4G LTE top achievers in 2017. nationwide at the fastest rate of any operator in the country. Etisalat Misr’s priorities in 2018 will be to provide the best The company further took the lead in promoting data usage and customer experience in the market, take advantage of the maximising the economic value that the company can extract growth opportunities in enterprise, digital, mobile payments from the massive demand for data. Etisalat Misr’s focus on areas, increase adjacent revenue streams, make smart strategic managing capacity and value, rather than cost, enabled it to investments for the future of the company, intelligently manage achieve excellent operating results and so maintain its position as the competitive landscape, and continue to empower customers to the second-largest operator in the Egyptian market last year. lead happy and successful lives.

44 45 ETISALAT GROUP | ANNUAL REPORT 2017

MOROCCO

In 2017, Maroc Telecom Group defended its leadership position doubling the bandwidth for free, lowering the price of the entry- in Morocco and grew its international operations leveraging the level offer, and enriching these offers through the addition of a free key networks investment it made, despite the extensive regulatory voice line. What’s more, these same benefits were also offered to the changes and intense competition. This flowed seamlessly through the professional customer segment. Group’s persistent drive for innovation, insightful customer-centric initiatives, and unwavering commitment to investing in the future. The Group further strengthened its broadband leadership position with the launch of its wide range of VSAT Satellite Internet Offers. Maroc Telecom Group capitalised on its capacity for innovation to These provide countrywide internet access (of up to 20 Mbps) to provide all Moroccans with greater access to telephone and internet the Kingdom’s various residential, business and professional market services, as well as a large variety of digital content. It leveraged segments. For corporate customers, Maroc Telecom also now offers the expertise and experience of its teams to offer its customers the satellite VPN service, to provide a virtual private connection intelligent, original telecommunication solutions. between several remote sites with speeds of up to 6 Mbps.

In order to adapt to ever-evolving user requirements, Maroc Telecom With the launch of its unique new entry-level business package, launched a new controlled data-oriented plan, which offers 25 GB Maroc Telecom began offering even greater value to companies and in addition to 10 hours of talk time per month, in tandem with the professionals in 2017. Maroc Telecom also expanded its business-to- existing voice-oriented offer of 6 GB of data plus 20 hours talk time. business catalogue with the launch of a generous new capped data Maroc Telecom also enhanced its data-only offerings, particularly for system, which provides more data and more hours of talk time to the prepaid segment, in 2017. One facet of this was the enrichment closed family members and friends. of its “MT-Talk” Social Media Pass to include Instagram access – a first in African telecommunications. Also within the prepaid One of Maroc Telecom’s most exciting innovations in 2017 was the segment, Maroc Telecom launched a new optical recognition (via the addition of a new on-demand music streaming service, DIGSTER, to smartphone camera) service, which has significantly improved the its content portfolio. In addition to DIGSTER, the Group’s on-demand prepaid customer’s experience. Beyond this, Maroc Telecom responded catalogue includes the Anghami music-download service and two to the growing demand for home-based internet with the launch of video services: ICFLIX and StarzPlay. its long-awaited Double Play ADSL 12 MB offer, which specifically appeals to the middle-income customers. The highlight of 2017, in terms of value-added services, was the launch of Smart Car, a new and innovative Fleet Management Meanwhile, to meet strong demand for high-speed broadband, Maroc service, accessible to professional and corporate clients, as well as Telecom accelerated the deployment of its fibre-optic infrastructure the general public. Unlike similar solutions on the market, Maroc throughout the Kingdom. As the Group rolled out this infrastructure, Telecom’s Smart Car equipment is so easy to install that users can it actively promoted the associated services by, among others, do so without the help of a specialised technician. Other significant

46 47 ETISALAT GROUP | ANNUAL REPORT 2017

MAD MAD MAD

53.5 MILLION 2.0 MILLION 1.5 MILLION 35.0 MAD 17.2 MAD 49% 5.7 MAD 8.2 MAD MOBILE SUBSCRIBERS LANDLINE SUBSCRIBERS FIXED BROADBAND SUBSCRIBERS BILLION REVENUE BILLION EBITDA EBITDA MARGIN BILLION NET PROFIT BILLION CAPEX

value-added products launched over the course of the year for extended to each of the countries in which it operates in 2017. All on the protection of personal data of natural persons. To achieve this, participation in the Nafid@ programme, whereby more than 244,000 corporate customers include cloud-based email and web security subsidiaries implemented ambitious investment programmes to the Group continually strengthens the security of its information teachers were equipped with internet connections at advantageous services (from Leader ZScaler), a Hosting Offer Data Centre dedicated introduce innovative new services and improve of the quality of systems and online services. It ensures, through internal controls, prices by the end of September 2017. Maroc Telecom contributed to the needs of companies’ IT infrastructure collocation, Office 365’s existing services, specifically to promote broadband internet access that the processing of personal data does not represent any risk of 69% and 71% respectively to the Injaz and Nafid@ programmes, email and collaboration service on the Microsoft Leader cloud, and for all segments of society. invasion of privacy and that it is carried out within the framework alongside three operators. the first security service (by the leader Arbor) in Morocco to fend off of authorisations issued by the National Commission for Protection DDoS attacks. Together, all of these new offerings have strengthened In 2017, Etisalat Benin commissioned 4G technology, whilst Moov Control Personal Data. Beyond this, in keeping with its environmental policy objectives, the Maroc Telecom’s status as a leading pioneer in the high-value-added Niger launched 3G++ services. Mauritel in Mauritania launched a Group continued its efforts to minimise the impact of its activities cloud offer market. fixed Duo + Internet ADSL offering starting from 2Mbps and Onatel Beyond its commitment to providing its clients with the best possible on the environment. Actions to mitigate this impact included the use in Burkina Faso doubled ADSL without raising prices. Gabon Telecom, customer experience, Maroc Telecom is devoted to giving back to of renewable energies and the installation of free cooling ventilation As a technology leader, Maroc Telecom stands out for the reach and meanwhile, facilitated access to FTTH technology through several the communities in which it operates. As such, the Group allocates equipment at the technical sites. This enable a reduction of up to 70% quality of its networks. Since 2013, as part of its proactive investment promotions on migration and installation fees and the launch of a considerable resources to ensuring maximum coverage of territories, in electricity consumption, the establishment of more economical policy, the Group has devoted more than 20 billion MAD to the 100 Mbps bandwidth offer. especially those in remote areas. Indeed, it served nearly 27,300 technologies (Single RAN), and the promotion of dematerialisation. densification and modernisation of Morocco’s telecommunications remote locations last year. Maroc Telecom also became the first Further to this end, the Group identified and classified all the waste infrastructure and the introduction of ultra-high-speed broadband At the same time, these subsidiaries all pursued the development of global operator to offer “Broadband Internet Satellite VSAT”, with full generated by its activities and implemented actions to valorise each services to the Kingdom. value-added services such as VoD and Play VoD (Gabon Télécom), the coverage of Moroccan territory, in 2017. Internet access via satellite type of waste in accordance with the regulations in force and the Mobile Money Microinsurance Service (Etisalat Benin), the opening of transmission enables stable and efficient connections, even in the good practices of the sector. As a result, nearly 87% of Maroc Telecom’s mobile site base’s new international money transfer destinations for mobile money, the most remote Moroccan localities. equipment now supports 2G, 3G and 4G connections simultaneously. development of mobile banking offers, and contactless payment (NFC) Maroc Telecom continued to participate in the Carbon Voluntary Moreover, as of the end of September 2017, Maroc Telecom has made via Mobile Money (Moov Côte d’Ivoire). Furthermore, the Group continued its efforts to facilitate the Offset Programme of the Mohammed VI Foundation for very high-speed internet access, with complete mobility, available to integration of information and communication technologies (ICT) in Environmental Protection and its Clean Beaches programme. 86.4% of the Kingdom’s population, through its 4G + network. In the interests of enhanced customer centricity, Maroc Telecom teaching and learning, helping to improve knowledge acquisition. It made new information and communication technologies accessible remained committed to supporting public authorities in establishing Ultimately, in all of its efforts to invest in the future, Maroc To strengthen its fixed-access network, Maroc Telecom deployed to the greatest number of people possible by continuing its existing and sustaining ICT programmes in schools. This is evidenced by the Telecom has continued to develop synergy amongst its subsidiaries a great deal of Multi-Service Access Mode equipment as close to policy of tariff cuts in 2017. To the same end, the Group put new deployment of the third phase of the Génie engineering programme, to value the Group’s investments. This included the sharing of customers as possible. These devices support ADSL2+, VDSL and payment channels (mobile applications, internet, terminals, ATMs, which included the allocation of equipment to more than 3,200 technological and operational expertise and experience. Together, GPON and allow very high-speed internet access with improved and alternative networks) in place to make it even easier to recharge schools for ADSL internet access and filtering solutions to protect the continuous improvement of infrastructure security, optimisation quality of service. With these new devices, equipped with the latest and settle accounts. Meanwhile, Fidelio, Morocco’s first points- young students from potentially harmful online content. During the of management processes, securing of turnover, and reinforcement Gigabit-Capable Passive Optical Networks (GPON) technology, Maroc based loyalty programme, allows Maroc Telecom’s post-paid mobile first and second engineering phases, Maroc Telecom connected nearly of the Maroc Telecom’s international capabilities all play a special Telecom’s fixed-line customers now have access to fibre-to-the-home and fixed-line customers to accumulate points based on their 1,300 establishments, representing 49% of the total contributions of role in these exchanges. (FTTH) internet at speeds of up to 200 Mbps. The Group also supports consumption to enjoy exclusives benefit like discounts or rewards for the five operators that participated in the initiative. the growth of internet data usage through the continuous expansion products and services purchased. of internet transit capabilities and its IP/MPLS network, complete with In addition and as part of its Injaz programme, Maroc Telecom 100 GigaEthernet (GE) interfaces. Maroc Telecom is also highly committed to protecting its customers’ designed innovative offers that enabled more than 88,600 students to personal data (information security measures stipulated in the ISO benefit from mobile broadband internet access as well as laptops and As always, Maroc Telecom Group’s proactive investment policy 27001 standard, version 2013) and in compliance with the law 09/08 tablets at advantageous prices. Maroc Telecom has also continued its

48 49 ETISALAT GROUP | ANNUAL REPORT 2017

PAKISTAN

PKP PKP PKP

117.0 PKR 39.4 PKR 34% 4.3 PKR 29.8 PKR BILLION REVENUE BILLION EBITDA EBITDA MARGIN BILLION NET PROFIT BILLION CAPEX

19.0 MILLION 3.0 MILLION 1.4 MILLION MOBILE SUBSCRIBERS LANDLINE SUBSCRIBERS FIXED BROADBAND SUBSCRIBERS

50 51 ETISALAT GROUP | ANNUAL REPORT 2017

PAKISTAN - PTCL PAKISTAN - UFONE

With its ever-present focus on enhancing the customer experience, enhanced international connectivity. Fuelled by its passion for collaborative solutions, Ufone launched first), subscribe to bundles/VAS, among others. the company launched the network transformation programme for and upgraded numerous technological innovations and expanded broadband services aimed at providing high-quality ICT services In 2017, PTCL initiated an (NTP) with the aim of providing high- its network and digital footprint in pursuit of a more customer Ufone also upgraded its campaign management system, resulting while catering to the growing demand for Data. quality ICT services, especially to its fixed broadband users. The centric experience in an increasingly digitised age. in the integration of multiple channels into the system. This, in programme aims to revamp the top 100 exchanges in major cities. turn, increased the scope of activities that can be managed for PTCL Group, which is the only Pakistani operator with fixed and About one third of the project was completed in 2017 and the The Pakistani cellular market remained highly competitive in 2017. subscribers through customer value management (CVM). mobile presences, was able to retain its leadership of the fixed-line project will end in early 2019. This revamp will enable the provision In particular, increased data usage was the primary source of market and its number 2 position in terms of fixed and mobile value of high-end data services at up to 100 Mbps and will almost triple growth for the industry last year. Lucrative as this market may be, The Company further enhanced the customer experience in share in 2017. This was achieved via a combination of innovation the overall broadband capacity to meet the growing demand. The however, profits are eroded by the fact that the telecom market 2017 by introducing several VAS focused on consolidating and and customer centricity, to realise significant growth in several NTP will improve key indicators such as revenue, churn rate, and of Pakistan is hyper-competitive. This is a matter of grave concern rationalising the existing portfolio and roll-out of tailored services pivotal areas. customer experience. for all of the country’s telecom operators, who are collectively to tap into new revenue streams. With the recent increase in calling for immediate regulatory remedies to curb the overall value data handsets, traditional VAS practices are evolving into more In 2017, PTCL invested heavily in carrier and wholesale (CWS) During the year, PTCL launched its high-speed CharJi 4G LTE services erosion of Pakistan’s telecom sector. targeted approaches, with offerings like Caller Tunes, Advance international bandwidth, in which it has a 53% market share. Key in Azad Jammu and Kashmir (AJK). With this launch, PTCL became Credit, and the recently launched My Status. As a result, Ufone initiatives taken by the company to maintain its leadership position the first operator to offer next-generation wireless 4G LTE services In addition to actively joining in this push for regulatory change, invested considerably in developing the accessibility of VAS in this arena include tower fiberisation, long-term fibre back-haul in the region. The Charji LTE can provide high-speed wireless Ufone constantly strives to make the most of the rich potential via smartphones and introduced multiple smartphone apps – contracts with Telenor and Zong, and connection with the AAE-1 broadband internet services at up to 75Mbps. posed by the boom in data and digital demands through a including Utunes, Mobile TV (media station), Uislamic (religious (Asia, Africa, and Europe) submarine cable. powerful mixture of innovation and customer centricity. In 2017, content), and Ushow (movies on demand), among others – over Meanwhile, PTCL began introducing a high-capacity 100Gbps the company maximised its digital portfolio via the introduction the course of the year. As mentioned, innovation played a major role in PTCL’s continued backbone network for both its IP and Transport layers to enhance of gaming stores, app stores, and direct carrier billing avenues progress in 2017. As Pakistan’s leading telecom and ICT provider, the customer experience and meet ever-growing data traffic needs. to sustain value-added service (VAS) penetration into the During 2017, Ufone won six of the nine zones auctioned off by PTCL collaborated with the Khyber Pakhtunkhwa (KPK) Information The modularity and flexibility of this new solution (as compared smartphone-user base. the USF in Baluchistan province and Federally Administered Tribal Technology Board to deploy and manage Wi-Fi hotspot services to the existing 10Gbps backbone network) will help to reduce Areas. Ufone thus enjoyed first-mover advantage as it rolled out at 26 universities throughout KPK province last year. Moreover, operating and capital expenditure. The operator also enhanced its As part of its U900 project (second carrier for 3G data through re- its mobile services in various rural areas with the potential for PTCL SmartCloud has created a niche for itself in the market by metro network by substantially increasing capacity and introducing farming of GSM900 MHz spectrum), Ufone continued its ongoing extensive subscriber base growth and network expansion. providing truly agile, flexible and innovative solutions that cater to new technology. In four cities, PTCL replaced existing outlived network upgrades in 2017. This enabled the company to boost its the diverse needs of modern businesses. Finally, as part of PTCL’s platforms with a new 100Gbps network, based on the latest and 3G network performance and capacity to significantly improve To further enhance the customer experience, Ufone collaborated operational efficiency initiatives, two performance-optimised data most efficient Multiprotocol Label Switching – Transport Profile network quality as well as the general perception of Ufone in the with PTCL to introduce 29 “Joint Shops” nationwide. Moreover, centres were established at two sites at the Karachi, Pak Capital and (MPLS-TP) technology. market. In addition, it enhanced 3G coverage and growth in the 59 PTCL Smart Shops will be renovated and converted into PECHS exchanges and over 200 BTS and MSAG sites adopted solar number of active 3G users. Joint Shops in 2018. This initiative has not only resulted in cost power systems. These initiatives will not only assist PTCL to reduce In 2017, the company commissioned the Asia-Africa-Europe 1 (AAE- optimisation but also promoted the spirit of looking inwards for operating expenditure; they are also environmentally friendly and 1) cable system, connecting South East Asia to Europe via Egypt and Innovation converged with customer centricity in many of Ufone’s effective collaborative solutions. will significantly increase sites’ availability. became the only operator in the region with four redundant and other pioneering initiatives in 2017. Such innovations in the resilient submarine cable systems. service of an improved customer experience include the My Ufone In 2018, data will remain the main growth driver for the telecom As always, another common thread throughout all of PTCL’s customer app and various VAS. sector. Accordingly, Ufone will invest in its future by increasing activities in 2017 was customer centricity. These include the Moving into 2018, PTCL will maintain its focus on implementing the its 3G footprint with intensified efforts to build data capacity. Network Transformation Project (NTP), the CharJi expansion/ National Transformation Plan, that started in 2017, to realise greater The revamped My Ufone app now offers customers a 24/7 service Furthermore, Ufone intends to enhance its share of subscribers’ launch, the 3G to 4G device exchange, the introduction of the IP operational efficiency and improved network capacity, while better channel on which they can use the app to pay bills, recharge gross additions within the market by increasing its biometric and transport network, doorstep delivery of devices by courier, and addressing customer needs and expanding the Company’s reach. balances, purchase Super Cards via credit/debit card (an industry footprint for more aggressive subscriber acquisition.

52 53 ETISALAT GROUP | ANNUAL REPORT 2017

AFGHANISTAN SRI LANKA

In 2017, Etisalat Afghanistan entered its second decade of to two particular customer segments: the youth and business A highly competitive Sri Lankan telecommunications sector, a Beyond this, Etisalat Sri Lanka’s call centre continues to be connecting Afghanistan with the world and vice versa. Building on enterprises. In order to satisfy the unique and diverse needs of largely unfavourable regulatory environment, and increasing one of the most highly recognised call centres in the Etisalat the many successes achieved during this time, the company worked customers in these categories, Etisalat Afghanistan participated revenue cannibalisation by over-the-top services posed significant footprint for its best practices in using automated service even harder to invest in its own future and that of its customers and in various pertinent initiatives and introduced a variety of new challenges for Etisalat Sri Lanka in 2017. The company faced these delivery via Interactive Voice Response (IVR) solutions as well as their communities. A focus on innovation and customer centricity products and services. obstacles with a combination of digital innovation, customer agent utilisation and as one of the Group’s best cost-optimised resulted in exponential increases in market share. centricity, and a stronger focus on data services. operators. In fact, a Quality of Service audit initiated by the To engage the youth market, the company made it easier for Telecommunications Regulatory Commission of Sri Lanka in Since its advent in 2007, Etisalat Afghanistan has made excellent students to access telecom services for both communication Etisalat Sri Lanka’s primary response to these various challenges 2017 recognised the Etisalat Sri Lanka Call Centre’s service-level progress in many areas across its operations, despite an oftentimes and academic research purposes. This included the provision of has been to give greater attention to its data offerings to tap into delivery performance (time for initial response to speak to an adverse climate for telecommunications in the country. Among affordable data packs as well as low-cost, locally manufactured the significant opportunities that exist in this market. In fact, the agent) as the best of all operators in the country from Quarter 4 other achievements, the company was the first to introduce 3.75G hardware. company, with its fully equipped IP-based backbone supported of 2015 to the end of Quarter 1 of 2017. and mobile money services to the region. Moreover, a decade by its 3.75G network across the island, regards data as its main of innovation has seen the company transform voice and data Meanwhile, Etisalat Afghanistan provided complete end-to-end growth driver. Because Etisalat Sri Lanka understands that customer centricity services across Afghanistan. As the country’s most reliable network enterprise solutions for its business subscribers. The company is about more than service delivery, the company engaged in for data users, Etisalat Afghanistan now has over 1.2 million data conducted several business forums, during which proven practices The company also used innovative solutions to improve customer numerous corporate social responsibility initiatives in 2017. users on its network. for successful and profitable business endeavours were shared centricity and to stand out from the Sri Lanka’s heavily saturated In the wake of the May 2017 floods and landslides, which with SME operators, in various provinces. The company also telecoms crowd in 2017. This included the launch of Etisalat Sri affected over 400,000 people in 15 districts across Sri Lanka, In 2017, the company grew its subscribers by 20% year-on-year. promoted the use of mobile money to enable easier access to Lanka’s cliQ app, a time-based proposition for pre-paid customers. Etisalat launched its “Manudam Sapiri Nobindunu Sabadiyawa” Such unrivalled success is powerful testament to the level of and payment for services. In particular payment disbursement It is a native mobile application that allows users to purchase campaign to provide relief for the victims. Etisalat Sri Lanka trust that the company inspires in the people of Afghanistan. opportunities to government entities were explored. time-based internet access easily and affordably, granting full collected donations from the public to support those affected. This trust relationship begins with the continued commitment control and understanding of how consumers buy, pay and use The aid was then distributed to the affected families in the of the company, as a pioneer in technology innovation, to using Despite security challenges, Etisalat Afghanistan brought these their personal digital services. Users can select a plan for whatever Kalutara, Matara and Rathnapura Districts. the power of communications to make a better world. In keeping and other solutions closer to where people need them via duration they need, be it as short as five minutes or as long as two with its motto, “together toward a better future”, the Etisalat intensive retail channel expansion. This entailed the recruitment hours, providing consumers with convenient connectivity at all In addition, the Etisalat Business Solutions team used their Afghanistan brand is built on optimism about the possibility of a of more retailers, an incentive scheme for expanding at grassroots times. mobile platform management expertise to provide aid during this brighter future for the people of Afghanistan. level, and a push for e-top-up services with a running customer time. The team’s simple yet effective solution enabled stranded bonus-on-recharge model. Another digital innovation introduced in 2017 in the service of individuals to send text messages to an Etisalat Number allocated Of course, beyond their intrinsic value, strong ties with customers improved customer centricity is “One Etisalat”, the company’s self- for the purpose to request immediate support. Etisalat relayed are vital to Etisalat Afghanistan’s capacity to sustain revenue In the year ahead, with continued emphasis on data as a growth care app. One Etisalat provides all essential services and products this information to the Disaster Management Centre, which growth. Company strategy is therefore always measured by its engine, Etisalat Afghanistan will focus on maintaining data in a single app, designed with the tech-savvy customer in mind. then reached out to these people. In this way, Etisalat Sri Lanka ability to strengthen these relationships by providing exceptional leadership through continued investment in new technology; The One Etisalat home page indicates customers’ outstanding fees, helped to save 2,500 lives during the flood-affected season, an customer experiences, optimising expenditure, and investing in leveraging small-screen vs. large-screen data propositions in and available account and data balances. Other features include achievement which won the company a Silver award at the 2017 ongoing overall expansion. pursuit of more customer-focused innovations and Wi-Fi off- adjustable app settings, usage details, billing information for Global Smarties Awards. loading of 3G data services for better service quality. As always, post-paid and pre-paid customers, credit management/ support, However, without innovation, all of these efforts would come the company will constantly work to enhance the customer and various value-added services (VAS). VAS include promotions, Looking to the future, Etisalat Sri Lanka’s focus for 2018 will be to nought. Improved engagement depends on the provision of experience while taking full advantage of the privilege of sharing roaming and IDD, “Call-a-Tune”, profile management, caller concentrated on acquiring and retaining high-value customers, in pioneering products and services to promote the socioeconomic its successes with the entire Afghani community. management, loyalty rewards, locate us, and service messaging. this fiercely competitive market, where the data and voice tariffs empowerment of Etisalat Afghanistan’s customers. In 2017, the Furthermore, for the convenience of the pre-paid data users, the are among the lowest in the world. company paid attention to providing such innovative solutions aforementioned cliQ app is hosted on One Etisalat.

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Tamdeed Projects was also selected to deliver the planning and products – including Trio Cards (multi plug-in SIM), M2M, and 4G/ execution of a fibre-optic interconnectivity project spanning LTE SIM cards, and quarter SIM cards – last year. The company the entire Gulf Cooperative Council (GCC) region. The aim of the also ensured operational excellence whilst drastically reducing ETISALAT project is to establish a mission-critical technological foundation operational expenditure by negotiating with its reliable suppliers, SERVICES HOLDING to support collaboration amongst GCC member states. thereby saving significant procurement costs. Tamdeed’s success in its various ventures is evidenced by its Etisalat Academy (EA) numerous outstanding industry certifications and awards, such as For the third consecutive year, Etisalat Academy organised one ISO (9001 and 14001), OHSAS (18001) and FTTH Council Middle of the largest and most diverse youth summer camps in the UAE In 2017, Etisalat Services Holding (ESH) and its seven operating Telecom Group, Telna, Safaricom, and others. East and North Africa Gold Membership. In the summer of 2017. With sponsorship by the ICT Fund of companies made great efforts to drive the digital future in their the Telecommunications Regulatory Authority (TRA), the camp respective fields, from facilities management to education to the In collaboration with Etisalat, British Telecom, and the Khalifa Etisalat Information Services (eIS) activities were conducted in five cities (Abu Dhabi, Dubai, , laying of submarine cables and beyond. ESH grew its capacity University Innovation Centre (EBTIC), EDCH is enabling service eIS is recognised as the UAE’s leading local search provider. The and Al Ain) and the number of participants to offer strategic value addition to all Etisalat Group companies differentiation by adding artificial intelligence (AI) and other company maintains a business listings directory, which is used by exceeded 3 100 Emirati national students from primary, by providing first-rate telecom-related business services in an cutting-edge innovations to its business toolkit. Innovative Directory Enquires (181), and also publishes printed and digital preparatory and secondary schools. increasingly digitised arena. products launched by EDCH in 2017 included mobile money hub directories both on the Internet and via mobile applications. solutions, cloud-based services, Wi-Fi roaming hub, and fraud- Meanwhile, through its Kawadir Nationalization Centre, in In 2017, ESH renewed its commitment to provide exceptional prevention solutions. With the ceaseless evolution of the directory media advertising partnership with Absher initiative, EA continued to prepare UAE telecom-related business services via its portfolio of seven industry in the digital space since 2015, eIS has increasingly nationals for the job market. Furthermore, while focusing on operating entities that all achieved major milestones in their EDCH’s sterling reputation as a major contender in the telecoms focused on digital media advertising. In 2017, eIS continued individual capability development, Etisalat Academy launched respective fields and regions. In this way, ESH more than met the arena was, once again, confirmed when various esteemed to support and grow www.connect.ae, the UAE’s first and only its open enrolment programme, introducing in-demand industry needs of its esteemed private and public sector clients. members of the roaming industry voted unanimously in favour bilingual, hyper-local search engine enabling location-based specific programmes. of EDCH to host the Global System for Mobile Communications search and navigation of all businesses in the country. This is in Etisalat Facilities Management (EFM) Association’s (GSMA) Wholesale Agreements and Solutions addition to the long-established and well-known Etisalat yellow In the coming years, Etisalat Academy aims to align itself Driven by a passion for people, a collaborative spirit, and a (WAS) conference in Dubai in March 2018. More than 1,300 pages and white pages directories. with global learning trends and introduce innovative learning constant quest for innovation, Etisalat Facilities Management’s delegates from over 120 countries will attend the event. In mechanisms, including blended learning, gamification, VR advanced and dynamic facilities management solution operates addition to engaging in discussion of agreements and charging To the same end, eIS also signed multiple partnerships with learning, and others. in almost all EFM business sectors. In 2017, EFM launched a set principles for roaming and interconnectivity, EDCH’s WAS team leaders in the digital sphere in 2017 and it continues to aggregate of new products and services (including digital services) based will support three GSMA Projects: Connected Living, Digital various verticals by enhancing these partnerships. The company E-Marine on cutting-edge software capable of tracking project progress Commerce Mobile Money Interoperability, and Network 2020. The now covers all space media in the UAE and is in the process of As the trusted principal provider of submarine cable solutions in from planning through to invoicing. In addition, EFM established company reconfirmed its commitment to its clients’ satisfaction expanding beyond the UAE to become a global player. the Middle East and Sub-Continent, E-Marine is committed to centralised shared services for the Etisalat Group in an effort and security in 2017 with the acquisition of various important the region’s advancement. After commissioning the world’s most to optimise the utilisation of resources and enhanced customer certifications, including ISO 27001 and ISO 9001. Ebtikar Card Systems (ECS) advanced and environmental friendly cable ship, the CS Maram, satisfaction by tailoring its solutions to meet customers’ unique As one of the best secure industrial organisations in the UAE, ECS in 2016 to maintain its core business, E-Marine added a new requirements. Finally, Etisalat Facilities Management achieved Tamdeed Projects is a major provider of smartcard solutions in the region. The ECS multi-purpose vessel to its fleet in 2017. The MPV Athba was preferred supplier status for Etisalat UAE by implementing several Tamdeed Projects made extensive progress in its transformation factory holds the GSM Association’s for Security Accreditation commissioned to penetrate the energy sector and tap the revenue- strategic initiatives that enhanced the operator’s services. into a technology solutions specialist in 2017. With decades of Scheme Certificate (SAS) for SIM and Smartcard , generating potential in that niche. The company is all set to enter ISP and OSP expertise, Tamdeed Projects is evolving into a leading in addition to ISO 9000, 14000 and 18001 certifications for the oil and gas market, which is showing early signs of recovery Emirates Data Clearing House (EDCH) systems integrator and business solutions provider in information quality, health and safety standards. The company views these after a few challenging years internationally. E-Marine now has As the most trusted and reliable intelligent roaming and and communications technology (ICT), ELV, and physical security; certifications as essential to giving consumers full confidence that total of five ships and one shallow-water barge. revenue-management partner in the Middle East, EDCH offers with its vision “to become UAE’s most dynamic and value driven its facilities comply with the most rigorous security procedures to comprehensive roaming solutions to mobile operators that assist ELV/ICT systems integrator”. protect all of the components, cards and information, including Finally, to cater to the developing East Africa market, E-Marine is them to increase revenues while reducing operational expenses. subscriber data for personalisation. planning to open a third depot in that region. This will not only As a result, the company was awarded several iconic flagship ICT create a strategic advantage in procuring additional business but The company is the leading provider of innovative cloud-based and ELV projects by various high-profile government agencies In 2017, ECS enhanced its internal production capacity to support the expansion and enhancement of the region’s digital solutions in the UAE and beyond, supplying more than 50 carriers and international clients in 2017. This included major ELV support market growth, demonstrating its ability to produce high infrastructure. E-Marine’s comprehensive business blueprint will across a broad geographical footprint In 2017, EDCH expanded systems for the New Al Ain Hospital Project, one of the largest volumes of high-quality SIM cards while adhering to the strictest give the company the edge it needs to become the preferred its portfolio to 10 new operators from the MTN Group, Expresso hospitals in the UAE. standardised security criteria. ECS introduced multiple new choice of customers in the region and beyond.

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management solutions. Based on an advanced satellite network, and explore possibilities for collaborative ventures. The road this exciting opportunity to develop agile solutions for faster, show included visits to Jeddah, Riyadh and Damam and was more reliable collaborative SAR efforts will improve government exclusively developed in line with KSA’s ongoing public sector emergency departments’ practical capabilities. interests. Thuraya also held discussions to determine the scope for developing specific M2M solutions such as seismic sensors for the THURAYA Towards the end of the year, Thuraya collaborated with satellite KSA market. communications company, Gulfsat at the Offshore Patrol Vessels (OPV) event in Kuwait. This strategic alliance will enable Gulfsat To reinforce its reputation as a prominent international to launch data services in Kuwait. Through it, the companies can telecommunications player, Thuraya engaged in several Thuraya focused on maintaining its role as a key provider of Group. This is game-changing communications technology for combine interests and increase both their distribution channels sponsorship initiatives in 2017. To begin with, the company Mobile Satellite Services – delivering data and voice connectivity ISR, SAR, emergency relief, and telemedical operations, office- among government, maritime, media and enterprise sectors in donated new supplies of emergency telecommunication to end-users in the Middle East, Africa, Asia and Europe – in 2017. in-the-sky, and BLOS missions. the surrounding region. The product range accessible to Gulfsat equipment to the International Telecommunication Union (ITU) With an insightful blend of customer centricity, innovation, and customers will include Thuraya’s land and maritime broadband under the Emergency Telecommunications support arrangement. participation in the Etisalat global family, the company drove the Shortly thereafter, Thuraya signed a memorandum of terminals, such as IP+, IP Voyager, Orion IP, and the newly This donation will strengthen the ITU’s capacity in natural disaster digital future across its broad and diverse footprint. understanding with Swiss new space start-up, ELSE SA, to pave launched Atlas IP. preparedness, SAR, and response using state-of-the-art mobile the way for a strategic alliance between the two organisations. satellite communication equipment. Although satellite communication is a small part of the overall The alliance helps both companies extend product and The company also launched Thuraya Atlas IP+ at the Europort communications market, it is growing, with Mobile Satellite service portfolios, gain expedited access to the market, and and ADIPEC events in Rotterdam and Abu Dhabi respectively in Thuraya is also an eager participant in global efforts to increase Services (MSS) growing faster than Fixed Satellite Services (FSS). expand services to customers with Internet-of-Things (IoT) November 2017. Atlas IP+ is a new modified version of the Atlas sustainable energy practices. In 2017, the company continued In this highly competitive MSS market, Thuraya continues to communication, enabled by the Astrocast satellite constellation. IP terminal and features improved power efficiency, a smaller form to support the University of Michigan’s Solar Car team in their lead the way. The company’s primary growth areas in 2017 were factor, and greater versatility than that of rival products. Voice participation at the Bridgestone World Solar Challenge (WSC) in Thuraya’s IP (data business), maritime endeavours, and M2M (new Later in the year, the company launched Thuraya WE, the calls over this terminal are made via the Thuraya Talk VoIP service, October. Thuraya helped the team establish remote connectivity entry to Internet of Things). Its greatest business achievement world’s first dual-mode satellite and long-term evolution (LTE) allowing for more cost-effective communication. with land data terminals such as the IP Voyager and satellite in 2017 was the deployment of IP data terminals for a Kenyan hotspot device. This pioneering product is testament to Thuraya’s phones as they sped across the Australian Outback and clinched Government Project. dedication to evolving and advancing products to meet the Finally, the company announced the launch of Thuraya Talk, a second prize. ever-growing global demand for wireless data connectivity on revolutionary app-based calling and messaging service that brings Across the board, Thuraya is taking proactive steps to hold the go. Thuraya WE is the world’s first compact portable device individuals closer to loved ones in remote locations beyond the The operator further sponsored several adventurers on their brave onto its lead and regain market attention via an innovative that facilitates seamless roaming – between satellite and GSM reach of regular terrestrial networks. The app is kept connected via forays into remote regions in support of various worthy causes new product strategy Numerous innovative initiatives broadband services – and keeps users in contact with family and the Internet and can be operated anywhere in the world via Wi-Fi, in 2017. This entailed, among other things, the provision of vital underpinned the implementation of this new solutions-based friends at all times, no matter where they are. The hotspot device mobile or satellite data. Thuraya Talk is compatible with iOS and connectivity for keeping in touch with teams. These included product strategy in 2017. In collaboration with international is compatible with iOS and Android devices and easily transforms Android operating systems on smartphone devices and is ideal for Himalayan summit experiences for mountaineers Holly Budge partners, Thuraya launched its connected ambulance service. any area into a Wi-Fi hotspot within a range of 100ft or more. users who rely on mobile phones to call Thuraya numbers. and Dr Skatov, expeditions in the Polar Urals by Aleksey Yakovlev, This ambulance-to-hospital telemedical system enhances the journeys up Gasherbrum II by WOPeak campaigners, and a Kenyan capabilities of medevac and air ambulance missions. It works Thuraya subsequently launched the Thuraya IP M2M, an advanced Of course, Etisalat’s characteristic emphasis on customer centricity safari by wildlife photographer, Majed Al Katheeri and his team. over Thuraya’s network, connecting onboard wired and wireless solution for IoT connectivity in remote locations that lie beyond underpinned all of Thuraya’s endeavours in 2017. medical devices to hospitals and diagnosing physicians. Using line-of-sight and outside the range of terrestrial networks. IP The company began the year with the launch of ThurayaSeaStar, a In 2018 and beyond, Thuraya will focus on maintaining its role as onboard cameras to zoom in on injuries for a close analysis, M2M supports high-volume, high-throughput M2M applications. circuit-switched voice terminal that is truly accessible to all those a key provider of data and voice connectivity to end-users in the off-site doctors can now advise emergency services personnel It provides reliable, cost-friendly connectivity for operations that who operate at sea. Designed for harsh environments, this new Middle East, Africa, Asia and Europe. Thuraya also plans to combat on the most effective treatment for urgent needs while depend on the collection of large amounts of data from distant, terminal meets the evolving needs of the modern fishing market the aforementioned macroeconomic and industry-related threats patients are en route to hospitals. inaccessible points. It creates exciting new possibilities within by introducing the latest in satellite communication capabilities to MSS revenue streams by tapping into the retail and mobile sectors like agriculture, oil and gas, utilities, government, banking, to smaller and regionally operated fishing vessels. ThurayaSeaStar network operator markets simultaneously to grow revenue in non- The company later launched Thuraya Aero – an airborne data- fishing, and renewable energy. The service is already being utilised provides voice, SMS, data and vessel tracking via an intuitive traditional ways. sharing platform that uses satellite communication to deliver in oil and gas systems integrations. interface, and is a great option for regional merchants looking for real-time, bi-directional voice, video and data capabilities. a backup system alternative to VHF and GSM. Thuraya Aero provides in-flight connectivity through internet The company also signed a memorandum of understanding with access, text messaging, phone calls, VOIP, and video and audio Huawei at the Interpol World 2017 exhibition. The partnership Later on, the company held one-on-one meetings with senior- conferencing, as well as aerial surveillance. Thuraya developed with Huawei specifically merges innovative capabilities for level officials and government system integrators in the Kingdom the system in partnership with global consortium, the Aero advanced public safety ecosystems and crisis and disaster of Saudi Arabia (KSA) to present Thuraya’s latest product portfolio

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HUMAN CAPITAL

With the goal of becoming the employer of choice in all of its level of excellence and are ready to compete at regional and markets, Etisalat Group continually strove to enrich the career global levels. experiences of its employees over the course of 2017. The Group adopted innovative approaches to Talent Attraction, Talent Employee Engagement at work was a major priority for Etisalat Management, Training and development, Rewards and Recognition in 2017. This began with assessing employee motivation and and overall Employee Engagement. Moreover, under Etisalat’s engagement to identify effective existing practices and areas for new vision, “Drive the Digital Future to Empower Societies”, improvement. As part of this, 85% of employees participated in the company nurtured its human capital in the context of an a global Employee Engagement Survey. Compared with last year, increasingly digital world and workplace. employee engagement scores increased for most of the OpCos and led by UAE (80%), Afghanistan (79%) and PTCL (71%). Beyond Etisalat’s unique transformational approach to human capital this, Etisalat promotes employees’ mental and physical health both has always extended an agile, digitally informed and responsive within the workplace and via the encouragement of better living “Human Resources Eco System” to support overall business habits. This involves Health, Safety and Environment (HSE) training strategies. In all operations, the company’s Human Resources sessions and committees to eliminate risks as well as a wide variety teams are dedicated to quality and excellence. By ensuring that of events to emphasise the importance of healthy lifestyles. its employees are up-to-date with trends in digital technology, Etisalat Group enabled them to maintain the highest and Etisalat Group also recognises that employee retention and most up-to-date skills levels in their various roles last year. advocacy is largely dependent on the provision of challenging Accordingly, Etisalat’s Talent Management team actively drove opportunities within a performance-driven culture. In 2017, the the company’s human capital in the direction of the digital company enabled employees to unleash their talent, passion future through strategic learning in futuristic technology. and capabilities in suitable roles with inspiring opportunities This eco-system is characterised by innovation, inclusiveness, for growth. The company’s training needs were identified and respect, reciprocity, recognition, and a profound concern addressed in terms of corporate strategic direction, department- for the physical and emotional well-being of customers and specific requirements, and individual performance management employees. In 2017, Etisalat’s Corporate Values (Collaboration, and special project needs. The Year 2017 also witnessed 5th Agility, Customer Centricity, and Empowerment) further batch beginning its leadership journey through its future strengthened this highly effective approach. This contributed leaders program “Qadat Al Mostaqbal Leadership Development to a significant culture shift within the company, positively Programme” – for growing the pioneers of tomorrow. Participants influencing employee engagement and motivation, talent were selected from all Etisalat Group companies via series of development and retention, financial results, cross-functional assessments and have the potential to advance toward senior collaboration, and overall performance. positions in the corporation.

Human Capital best practices are re-assured through the Human Etisalat benchmarks its numerous rewards and recognition Resources Excellence program, where all operating companies programmes on worldwide best practices – particularly those in under Etisalat Group capitalize on the model of EFQM (European the telecom sector. The Group’s many recognition programmes Foundation for Quality Management) by sharing successful acknowledge the contributions of employees beyond their official management practices. In 2017, we have reached the highest duties. These initiatives further contributed to Etisalat’s status as a average level ever with an increase of 15% y-o-y. Several highly sought-after employer in its countries of operation last year. operating companies have now secured a robust international As a socially responsible global company, Etisalat recognises

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that employees are incapable of achieving this kind of With an aim to develop national talent, Etisalat UAE has cation to world cup event and winners were rewarded with free reflecting the company’s values, Etisalat’s diverse workforce success outside of a safe and pleasant working environment. improved efforts in attracting Emirati talent including active subscriptions. is also a source of competitive advantage in business. This is To facilitate this, Etisalat Group adheres to stringent ethical participation in career fairs, dedicated recruitment campaigns, because Etisalat’s employees are truly representative of the standards, observing all applicable laws and regulations, in cooperation educational institutions for internships/work In Pakistan, PTCL team amplified its people-centric efforts different communities in which the company operates and its management practices. In addition, the company works placements to draw in skilled local citizens. Their success is in the form of higher employee engagement, training and the various customer segments with which it interacts. The continuously to respect and protect human rights – its most evident in the percentage of positions at all levels; 72.3% of development initiatives. On average, PTCL employees benefitted Group therefore strives to promote equal employment and important obligation as a member of a global society. As Nationals in upper management; 49% represented at middle from three days of training annually. The FUEL “Future Leaders growth opportunities for talented people of different genders, such, Etisalat has always followed labour practices in keeping management; 52.5% of technical staff are UAE Nationals in IT Programme” is another intervention by PTCL to identify, nurture origins, and work experiences. To ensure this, all staff members alignment with the law of land and aspire to extend a safer and Technology whereas UAE National females are 71.84% of and develop the next generation leaders. Meanwhile, the are encouraged to report any unlawful conduct, financial and better workplace. female employees at Etisalat UAE. Summit Management Trainee Programme targets the country’s malpractices, violations of Etisalat’s policies and procedures, top engineering and business institutes to build a sustainable or other offences that they may encounter. This confidential In 2017, Etisalat UAE also implemented digital campaigns The Year 2017 ended with noticeable recognition in the UAE for leadership pipeline for the company. In an attempt to assess the reporting channel extends to unethical behaviour, misuse and awareness programmes with various themes, including Etisalat with five key external awards. These awards were won ever-evolving needs of customer – internal & external, an “Idea of authority, leakage of confidential information, and any Virtual Reality Gaming, Digital Comic Stories, and others. These on the basis of people excellence, operational efficiency towards Olympiad” was launched generating around 650 actionable ideas form of unfair discrimination against any employee. Freedom campaigns increased the awareness and understanding of business people agenda, employee engagement and technology value to from participants. of association is also a very important component in this behaviours related to the company’s new values, in line with the internal customers. These awards assure leadership of Etisalat diverse environment. In all of its markets, Etisalat therefore UAE government’s push for innovation. In addition, with digital and focus on all fronts, these include - “Innovation in Employee Moreover, Ufone Pakistan kicked off a rigorous exercise for works to ensure open and constructive dialogue between all technology poised to drive the future direction of society, digital Engagement”, “HR Team of The Year”, “Best Employer Brand of the identifying business-critical roles across the organisation. This stakeholders, including trade unions. capability is essential to continued customer centricity and the Year”, “Best Employee Insight & Feedback” and “Best Internal Use paved the way for organisation to expand its talent pipeline for development of relevant products and services. In this regard, of Digital’. both top leadership positions and mission-critical roles across the Etisalat Group’s investment in its greatest asset align with the Etisalat UAE focused on building the digital future by developing business. aspiration of becoming an employer of choice in all of the regions the requisite skills and mind-set changes in 2017. Going forward In Afghanistan, Etisalat Team launched an innovative and in which it operates. The positive ripple effect of this on the with digital transformation, 2,722 staff was equipped with informative campaign to improve interaction between senior With a focus to develop capability for better tomorrow, Maroc Group’s performance, profitability and contribution to society core strength of Design Thinking, Cloud Business, and OFS management and employees. In addition to improving two-way Telecom Group delivered approximately 15,000 training days to is immeasurable. Employee Engagement at work will therefore implementation. communication, this campaign also created a platform in which 3,300 employees As a socially responsible employer, it has launched continue to be a major priority for Etisalat in the years to come. employees could share their achievements, gets recognised an initiative to make it a Tobacco-Free company by extending lot of To fortify the customer-driven culture, Etisalat UAE placed 1,576 thereby further increasing engagement indices from 75% to 80%. awareness sessions sharing the associated harmful effects and hand staff members in enhanced competence programmes as part of In addition to emphasis on building in-house capabilities through holding people who wish to quit this habit. the newly launched “Etisalat Sales Academy”. This provided core various learning interventions, there has been a comprehensive strength to enterprise-wide functionality, as well as the combined focus on improving overall well-being of the employees. “Let’s With almost 90 different nationalities across its footprint, synergies and reciprocal relationships that drive Etisalat’s business go green” campaign was part of efforts to improve sustainable Etisalat truly embraces diversity. The company welcomes forward. This exercise will boost the retail customer experience resources of the country. the energy, creativity, and innovation of its people, as they with winning store practices in business, sales and customer care. apply their different perspectives, competencies, and skills Overall 85% of employee population underwent new training In Saudi Arabia, keeping the people development at core, Mobily to address common business challenges. In addition to & development drive with 36,900 training days leading to 4.45 team launched second batch of Qiyadi program aiming to training days per staff. develop employees at executives, supervisory & managerial levels. Participation to Engagement Survey has increased by 16% to 88% In the UAE, Etisalat introduced new reward and recognition leading to a more inclusive & hopeful future ahead. Social media programmes, like OPCA Breakthrough Achievement Award (based campaign - “My Life in Mobily” was a huge success in attempt on achievement of the finest project supporting the business) and to educate & incubate future pool of talent to support the SPOT Recognition Award (allows managers and peers to recognise extensive growth plans in future. Mobily’s extended support for staff members, based on positive behaviour aligned to Etisalat’s young female nationals by actively participating in the Kingdom’s core values). Recipients of such awards were seen to go the extra International Women’s Day activities. mile because they were extraordinarily devoted to achieving business project goals. These had a powerfully positive effect on Etisalat’s Misr has launched a unique recognition program for em- various levels – in particular, staff turnover dropped to below 4% ployees – “Hero of the hero’s” rewarding extraordinary performers last year. on projects related to company’s strategic pillars. Etisalat Misr has launched “Cheer for Egypt” to celebrate the Egypt’s qualifi-

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CORPORATE SOCIAL RESPONSIBILITY

Etisalat’s ambition to drive the digital future is deeply imbedded in deeply integrates corporate responsibility into our business in the Group’s ongoing commitment to positively transform every life ways that create value for us, our subscribers and shareholders. it touches. In 2017, Etisalat Group invested in various initiatives As we transform from a telco to an ICT provider Etisalat foresees to empower people through technology in order to catalyse this immense potential to empower more people through our positive change for society. These endeavours targeted a wide technology and to harness the power of our network to help array of critical social concerns including education, health, address society’s most complex issues. economic growth, and the environment. Technology is an enabler and also makes a major impact in the In the era of ‘Going Digital’, governments, businesses and lives of people, Etisalat has taken specific initiatives to target consumers today are beginning to see the value of digitalization specific sects of the society. Maroc Telecom’s integration of ICT with the increasing presence of transformative technologies in in teaching and learning working alongside with the government their day-to day activities. With the evolution of technology, implemented ICT initiatives across schools in Morocco. As part today’s investments are focused on innovation to create of the deployment of the third phase of ‘Genie’ (engineering dependable products that enables distinctive experiences and program), equipment for more than 3,200 establishments were spread happiness in all segments of society. In the past year, allocated internet access ADSL and filtering solutions to protect Etisalat Group invested in initiatives to catalyse this positive students from sensitive content on the internet. change for the society and by empowering people through technology. Our technology infrastructure plays a critical role in In UAE, in collaboration with a local schools in Dubai, Etisalat creating this collaborative framework focused on the values of conducted internet security workshops for students where experts giving, empowerment and actively participating in community from Etisalat-WYANA team conducted awareness sessions on initiatives. Etisalat Group’s CSR strategy mainly focuses on giving protecting children from malicious content on the web. These back to the community in the countries it operates by enhancing initiatives also extended to Etisalat operations in Asia, cyber- the daily lives of consumers and contributing to humanitarian bullying was a focus area for Etisalat Lanka who jointly worked efforts on a local, regional and global level. As part of the overall with Srilanka CERT (Computer Emergency Readiness Team/Co- strategy, Etisalat Group has made the right partnerships, especially ordination Center) to host a forum to eradicate cyber-bullying in with the government sector to enable sustainable development the country for the next generation. across verticals mainly education, health, sports and environment. Etisalat UAE was also active in educational activities with As a group special efforts were taken to set new targets for participation in events and campaigns that has helped raised tackling issues like climate change, promoting sustainable funds for children in the developing countries to build their better economic growth and providing access to basic necessities in future. Etisalat UAE worked closely with Dubai Cares to organize many countries. 2017 was a year of tremendous change for a walk and an SMS awareness campaign that reached out to two Etisalat with the journey towards ‘Driving the digital future’ million customers witnessing the presence of 14,500 people at the initiated across our operations globally, we accelerated our efforts event. The participation at the Sharjah Children’s reading festival as a company to empower our internal teams and customers with was another major initiative to encourage learning and self- the right tools and services to make this digital dream a reality. education from a young age.

While the world and our company are changing, our commitment Our long-standing commitment to supporting good health to corporate responsibility remains as strong as ever. Etisalat was visible across our operations. Etisalat Misr participated in

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‘Tour and Cure’, a global medical campaign with World Health ‘Walk to Give’ was another initiative launched by the government Baluchistan including Khuzdar, Chaman, Pischin and Quetta. Technology also came to the rescue during this crisis, with Organisation that treated 1400 Hepatitis C patients free. They to support this special year, which organized a walk to highlight Etisalat Business Solutions putting to use its mobile platform also conducted awareness sessions on breast cancer and diabetes. the role of the media sector in supporting the success of national These local championships were organized for teams from management. The solution was simple but very effective, where Etisalat Misr along with the Egyptian Society of Womens Health initiatives. Etisalat also contributed to a workshop conducted local schools, colleges, universities and football clubs. These citizens were requested to send a text message to an Etisalat and Mersal foundation offered services and discussed the causes in collaboration with TRA and the Ministry of Community tournaments were a great opportunity for these young footballers number if they are stranded and are in need of immediate and benefits of early examination. Development during the ‘Annual Arab Deaf Week’ focusing who had a platform to showcase their talents and opens doors for assistance. This information was shared immediately with the on the objective that ‘Sign language is an important means better career opportunities. disaster management center who reached out to the affected The diabetes sessions raised awareness among employees of communication for deaf people’. Etisalat presented ‘CMe’ people. The solution saved 2,500 lives during the heavy floods and to increase knowledge on managing levels of blood sugar application with a sign language translator with a 50 percent Etisalat also supported the annual cycling ride hosted in the won global accolades for Etisalat Lanka. and decreasing the risk of health complications. Autism was discount to people with hearing disabilities. emirate of , which is on a 104 km route. The ride has over another cause that operations supported and 600 enthusiastic riders including the participation of Etisalat staff In Africa, Somalia faced severe drought causing a grave concern collaborated with Egyptian Autistic Society to raise awareness Etisalat also supported ‘Hope Makers’ awards was an event who was among the top performing riders. for those affected as well as globally. Etisalat along with Red on autism and change perceptions. The main objective was for conducted by the government in line with the ‘Year of Giving’ Crescent generated donations by sending SMSs to the 3.2 million parents to be able to diagnose autism and give proper therapy that recognized exceptional individuals who have contributed Etisalat has also been active during the year in being proactive customers generating a sum more than AED 2 million. to their children. to develop change and build hope in the fields of volunteering, during natural disasters by working closely with the affected by education, health, media and social activitism. supporting them with relief making sure that they are able to Blood donation drives were conducted in Saudi Arabia and have their basic requirements. In Srilanka this year with the major Pakistan getting the employees to actively participate encouraging Etisalat UAE was actively involved in ‘Change a Future’ as part of floods affecting 400,000 people in 15 districts across Sri Lanka, them to donate blood. Under the umbrella of PTCL Razakaar the ‘Happiness is Giving’ campaign in collaboration with Emirates Etisalat Lanka launched ‘Manudam Sapiri Nobindunu Sabadiyawa’. (volunteer) a nationwide mass blood donation drive was launched Red Crescent as well as Abu Dhabi and Dubai’s department of The staff and management came together by collecting donations with hundreds of camps set up across the country. At Mobily, as Economic Development. ‘Happiness is Giving’ engaged the private from the general public which included water bottles, bed sheets, part of the ‘Health and Safety’ program, employees donated blood sector particularly the retail sector encouraging organisations sleeping mats, mosquito coils and toiletries. as part of this country wide effort. to donate to ‘Emirates Red Crescent’ throughout the month of Ramadan. Etisalat contributed by allocating SMS short codes During the month of Ramadan, ‘Medical Box Donation’ was for the donation from which the payment was directly sent to carried out in collaboration with Al Ihsan Charity. Etisalat Emirates Red Crescent. contributed medical donations from Etisalat staff and customers to the center by placing medical boxes across 12 Etisalat With fitness being in the spotlight and a focus for many buildings in the country. This special effort collected medicine countries to raise awareness on good health, Etisalat worked worth AED 113, 385 supporting the center in giving these with private and public organisations to conduct activities medicines to patients in need. in many countries. In Morocco, Maroc Telecom has already established a ‘Maroc Telecom football school’ in 2001 to Mobily staff also carried out special efforts with orphanages to encourage young players to play and compete. Every year, the organize iftaars where employees and the orphans celebrated school has welcomed 200-250 children aged between 6 and 16 this occasion together. Due to their active efforts with these years. In Afghanistan, Etisalat organizes an annual marathon orphanages, Mobily was honored by the Charity Committee for across the province of Bamyan and is one of the largest Orphans care ‘Ensan’ in Riyadh during this holy month. In addition, international marathons in the country. The third edition took Mobily was also felicitated by Aaba Charity Association for place this year with participation of over 200 international and Orphans Care in Asir region, Ekhaa Charity Association for Orphans national runners giving the country a lot of global attention. care in Al Khobar and Takaful Charity association for Orphans care On a national level, Etisalat Afghanistan is extremely active in Al Madina Al Munawara. in volleyball, cycling, soccer and cricket. In volleyball, Etisalat Afghanistan sponsored the ‘National Volleyball Federation’, With 2017 declared as the ‘Year of Giving’ in UAE, Etisalat was which also included several grass root level tournaments. active throughout the year with activities that gave back to various sectors of the society. This kicked off with the installation Football was an active sport encouraged by Etisalat operation of free mobile charging units across public areas, which gave all in Pakistan, Ufone’s focus on Baluchistan due to its young and citizens the comfort of remaining connected with their family and talented population has seen its active support and participation friends 24/7 while they were away from their home. in organizing football championships across four cities in

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relation to accounting books, financial statements or control The Committee’s Charter has detailed the Audit Committee’s systems. The Committee also ensures that the auditor receives duties, composition, conditions and quorum for convening its timely response from the Management to his fundamental meetings and the mechanisms of its decision-making. notes. The Committee also looks into any significant and uncustomary items included or should be included in the The Committee is comprised of four members who are well-versed CORPORATE GOVERNANCE reports and financial statements. The Committee pays and experienced in financial and accounting matters. Three of attention to the matters raised by the Company’s Chief the Committee’s members were selected from among the non- Financial Officer, Compliance Officer or the external auditor. executive and independent members of the Board of Directors, and the fourth is an external member who holds finance-related The General Assembly 24th of March 2015 by the shareholders who own 40% of the • Developing and implementing a policy for contracting with qualifications with relevant experience. The Committee convenes The General Assembly (GA) is composed of all the shareholders Company’s shares; i.e. those shares not held by the Emirates the external auditors and raising its recommendation to quarterly or whenever necessary. and exercises all the powers granted thereto under the Company’s Investment Authority (the entity that represents the Federal the Board on their selection, resignation or discharge. Incorporation Law (Company Law) and its Articles of Association Government’s stake in Etisalat). The Committee also ensures their compliance with the Nominations and Remunerations Committee (“AoA”), as amended. applicable rules, regulations, resolutions and the Company’s In compliance with the applicable laws in the field of governance Etisalat is committed to applying best practices and corporate Articles of Association in addition to following up and and in implementation of its best practices, the Board of Directors The General Assembly of the Company is in charge of all the governance standards, taking into consideration the applicable monitoring their independence and meeting and discussing has constituted the Nominations and Remunerations Committee matters related to the Company as stipulated in the Company’s best international standards and UAE laws. Therefore, the with them the nature, scope and efficiency of their audit to undertake the duties stipulated in the Committee’s Charter, Incorporation Law and in its Articles of Association, and is, in composition of the Company’s Board of Directors took into and all relevant matters. which is in line with the requirements of the Governance Rules particular, entrusted with approving the Annual Report on the account the requirements of the legisalations related to and Corporate Discipline Standards and the relevant rules and Company’s activities, the Company’s financial position during the Governance Rules and Corporate Discipline Standards with respect • Reviewing, appraising and implementing the Company’s legislations put in force in UAE. This Charter is viewed as a preceding financial year, appointing external auditors and setting to the capacity of the Board members, where all current Board systems of internal control and risk management, discussing delegation from the Board of Directors to the Committee to their fees and approving their reports as well as discussing and members are non-executive and independent. about these systems with Board in addition to ensuring that discharge its duties mentioned therein. approving the balance sheet and the profit and loss accounts for the Internal Control and Audit Department carries out its the previous year. The GA also has the power to approve the Board Committees of the Board of Directors duties of establishing efficient internal control systems. The The main objective of constituting the Nomination and of Directors’ recommendations with regard to dividend pay-outs For the purpose of rendering the assistance to the Board of Committee studies the above-mentioned Department’s Remuneration Committee is to ensure that the Board of Directors and bonus shares, if any. Directors in discharging its responsibilities, the Board has reports and follows up the rectification measures for the is undertaking its duties competently and diligently. Thus, the established three Committees: shortcomings raised therein to ensure that it is undertaking Committee reviews the composition of the Board of Directors and The General Assembly is vested with the authority to elect the its duties accurately. In addition, the Committee provides the makes recommendations on the changes that can be carried out. Board Members who are not appointed by the Government and 1) Audit Committee; required tools for the Internal Control and for reviewing and Further, the Committee carries out annual review of the skills, to review and set Board members’ remunerations. The GA is the 2) Nominations and Remunerations Committee; and monitoring its efficiency. It also reviews the external auditor’s capabilities and qualifications required for the membership of the authority that absolves Board members and external auditors of 3) Investment and Finance Committee. evaluation for the internal control measures and ensures that Board and ensures constant independence of the independent liability, discharges them, or files liability lawsuit against them, a coordination between the internal and external auditors members of the Board of Directors and reports to the Board when as the case may be. Audit Committee exists. The Committee further looks into the outcomes of the any Board member ceases to be adequately independent. The Audit Committee undertakes its duties in accordance with its fundamental investigations on the internal control related Board of Directors Charter, which complies with the requirements of the Governance matter which are assigned to the Committee by the Board or The Committee is also responsible for organizing and following The Board of Directors exercises all powers required for the Rules and Corporate Discipline Standards and the relevant initiated by the Committee and approved by the Board. up the nomination procedures for Board membership in line with carry out of the Company’s business except those retained for legislations that are in force in UAE. This Charter is considered a the UAE’s applicable rules and regulations and Securities and the General Assembly by virtue of the Law and the Articles of delegation from the Board to the Audit Committee to undertake • Monitoring the Company’s abidance by the relevant laws Commodities Authority’s (SCA) resolutions. Association of the Company. the tasks mentioned therein, which include the following: and regulations and by the code of good conduct as well as setting out controls that enable the Company’s employees to The Committee is further entrusted with determining the Etisalat’s Board of Directors currently consists of 11 members, • Reviewing the financial and accounting policies and measures report potential violations in the financial statements or the Company’s needs for talents at the level of executive management seven of them including the Chairman of the Board, were in the company. internal control along with the measures that warrant fair and staff and their selection criteria, and with developing policies appointed by virtue of Federal Decree No. 30 of 2015 concerning and independent investigations for the same. for training, human resources and granting remunerations, the appointment of Government representatives in Etisalat’s Board • Monitoring the soundness and integrity of the Company’s incentives and salaries to the Company’s Board members, of Directors. financial statements and reports (annual, semi-annual and • Monitoring the related parties’ dealings/transactions with the executive management and employees in a manner that ensures quarterly), considering all the matters related to external Company, ensuring non-existence of conflict of interest and fulfilling its objectives and commensurates with its performance. The other four members of the Board of Directors were elected auditor’s work, action plan as well as the notes, suggestions making recommendations to the Board on such transactions The Committee’s Charter provided for the detailed powers of the during the General Assembly meeting, which was held on the and reservations raised by the Company’s external auditor in before signing of the same. Committee, its composition, the conditions and quorum of its

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meetings’ convention and decision-making mechanisms. Operating Structure of the Company During 2017, Etisalat continued to implement its revised structure, In the course of exercising its functions, the Committee takes which commenced in 2009. The purpose of the revision was into consideration the competitive nature of the Company’s to manage its international expansion strategy, protect value ENTERPRISE strategy and fair compensations that commensurate with resulting from the Company’s operations in the United Arab such strategy to attract, ensure diversification between the Emirates and overseas, and gain the trust of its stakeholders by RISK MANAGEMENT two genders and retain these talented employees for the implementing a solid structure based on best governance practices achievement of the best possible results. and corporate discipline standards.

The Nominations and Remunerations Committee is composed At the level of Etisalat’s operations in the United Arab Emirates, of four non-executive independent members from the Board of the Group’s organizational structure features two autonomous The Etisalat Group continues to recognise that the proactive authorised by the Board of Directors to supervise these areas. Directors. The Committee holds four meetings per year or Operating Units: the Etisalat UAE Unit (which is entrusted with management of risk is essential to the achievement of its strategic as needed. providing the licensed telecom services in the United Arab objectives. Within the Group’s internal control function, the Risk Governance Emirates) and the Etisalat Services Unit (a holding company Enterprise Risk Management (ERM) process ensures that principal Each OpCo has an Audit Committee that receives updated risk Investment and Finance Committee wholly owned by the Company and entrusted with providing risks are identified, assessed and managed across the Etisalat reports on a regular basis. The continuous review and monitoring In addition to the Audit Committee and the Nominations and certain non-core, non-telecom services to the Company as well as Group of Operating Companies (OpCos). Etisalat’s ERM framework of organisation-wide risks is undertaken by ERM Committees Remunerations Committee provided for in the legislations third parties). provides reasonable assurance that significant risks are identified (ERMCs), which are established across each OpCo and for the related to Governance Rules and Corporate Discipline Standards, and addressed. Etisalat Group as a whole. The ERMCs meet on a regular basis and the Board of Directors established the Investment and Finance The Company carries out a wide array of activities and review important risk-related information such as current risk Committee to assist the Board in carrying out its functions related responsibilities and defines the framework for the same. It Internal Control Environment drivers or factors, existing controls in place, the status of Key Risk to the Company’s internal and external investments. The Charter also establishes the key policies of its operating companies, The Etisalat Group employs a robust ERM system, which forms Indicators (KRIs), and the status of planned risk mitigation actions. of the Committee defines the functions and duties assigned to prepares their plans, monitors their operational and financial part of the “three lines of defence” internal control environment Summary risk reports are then provided to the Audit Committee the Committee and specifies the cases in which the Committee performance, and presents regular reports on the same to the as follows: for consideration. is entitled to make decisions as it deems appropriate. At the Board of Directors. same time, it provides for those cases in which the Committee’s The first line of defence is the day-to-day management of The ERM Process role is confined to making recommendations to the Board for risk across all OpCos. This is governed by existing policies and The ERM process involves the identification, assessment, passing appropriate resolutions thereon. That Charter is deemed procedures and includes the regular review of identified risks and management and continuous review of those uncertainties and an authorization by the Board for the Committee to carry out the the ongoing management of risk-mitigation activities. Each OpCo risks that can adversely influence Etisalat’s ability to achieve its functions and responsibilities stipulated therein. is responsible for overseeing its own risk management at this level. strategic objectives.

The Committee assumes a wide array of responsibilities, the The second line of defence involves corporate functions, which Regular risk assessments are conducted across all areas in which the major ones among which are the carry-out of reviews and making continue to be responsible for the oversight and monitoring of Etisalat Group and its OpCos operate in consideration of defined risk recommendations to the Board concerning the policies and risks. Dedicated functions such as Finance (Fraud Management appetite and tolerance levels. Risk assessment and mitigation is an frameworks related to the treasury, investment and divestment and Revenue Assurance), Regulatory Affairs, Legal, and Internal integral part of the Group’s annual business planning and budgeting strategies, capital structure of the Company and its subsidiaries, Control (ERM and Compliance) undertake various activities process. Etisalat’s ERM framework is aligned with international best the Company’s dividend policies which have regard to regulatory to mitigate and manage a wide range of risks. In addition, practices such as ISO 31000 standards. requirements and have impact on surplus funds, issuance of compliance capabilities within the Internal Control function have guarantees and pledges and definition of operational and financial been established in order to focus on legal compliance matters Principal Risks and Uncertainties targets, plans and KPIs. such as anti bribery and corruption requirements. The Etisalat Group continually monitors and reviews the principal risks that could materially affect its business, financial The Investment and Finance Committee is comprised of four The third line of defence provides independent assurance over performance and reputation. Whilst other risks exist, the following independent non-executive members from the Board of Directors. the Group’s and OpCos’ internal control environment by internal is a breakdown of the most significant threats across Etisalat’s The Committee holds at least four meetings per year. audit in addition to the other assurance functions outlined in the various operations: second line of defence. Strategic Challenges The Internal Control and Internal Audit functions continue • Geo-political threats: Ongoing political and geographical to be independent from Executive Management and report uncertainty pose continuous challenges across a number of functionally to the Etisalat Group Audit Committee, which is the countries in which Etisalat operates. The Group works

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THREE LINES OF DEFENCE companies’ regulatory departments, with support from the • Other financial exposures: The Group’s financial assets Group’s regulatory teams. and liabilities are exposed to additional financial threats, ETISALAT BOARD including interest rates, liquidity and credit risks. (Financial (AUDIT COMMITTEE) • Litigation: Like any other organisation, Etisalat is subject to risk management is discussed in greater detail in the Financial the risk of litigation by competitors, customers, regulators and Instruments section of this report.) other parties. This can affect the financial performance and GROUP MANAGEMENT reputation of the Group’s OpCos. Legal counsel within each The Etisalat Group’s Internal Control function develops an annual OpCo oversees and actively manages such litigation cases. The plan outlining the ERM and compliance activities, which are Etisalat Group’s legal team also provides ongoing support to approved by the Audit Committee. This aims to strengthen the the OpCos, where required. existing three lines of defence model through measures such FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE as maturing the ERM processes and co-ordinating existing Financial Threats compliance activities across the Group and OpCos. OVERSIGHT & CONTROL FUNCTIONS INCLUDING INDEPENDENT ASSURANCE • Foreign exchange exposures: Etisalat is exposed to the

uncertainty of foreign exchange rate volatility in some of • LINE MANAGEMENT • FRAUD MANAGEMENT • INTERNAL AUDIT the countries in which it operates. Specifically, this volatility • POLICIES & PROCEDURES AND REVENUE RASSURANCE may affect consolidated results and the overall value of • INTERNAL CONTROLS • REGULATION AND LEGAL Etisalat’s investment in overseas operations. Group Finance • INTERNAL CONTROL: ERM has established policies, procedures and tools to monitor, AND COMPLIANCE manage and report any such exposures.

closely with the respective OpCos’ management to leverage • Competition and pricing pressures: The markets in which local expertise and knowledge to combat these challenges. Etisalat operates are characterised by high levels of As part of this, the security of local employees is proactively competition (existing and new), declining prices, technology managed by local OpCo arrangements. substitution, market and product convergence, and customer churn. The Group must closely analyse and monitor the trends • Macro-economic conditions: Changes in regional and global in these markets and invest in its networks, products and economic conditions within a number of the markets in service offerings to compete effectively. which Etisalat operates present continual challenges to the Group. Such factors are considered during financial • Service continuity: The sustained continuity of Etisalat’s budgeting and planning processes. network across all its operating companies is vital to its continued success. The Group faces the threats of disruption, • Over-the-top (OTT) operators: The presence of OTT operators malfunction, and loss or damage to network infrastructure due is a common threat across the telecommunications industry to natural disasters or other uncontrollable events. As a result, that is affecting mobile voice revenues in a number of the Etisalat Group has put Business Continuity Management Etisalat’s more mature mobile markets. The increase in the teams – responsible for developing and testing business use of VoIP applications is cannibalising traditional telecom continuity plans and crisis management arrangements – in operators’ revenues. Various commercial strategies in place across its OpCos. Insurance policies are also in place to response to such OTT threats are considered and implemented make provision for infrastructure property damage. by respective commercial teams across the impacted OpCos. Compliance Challenges Operational Threats • Regulatory challenges and uncertainties: Because the Etisalat • Cyber security: The threat of external cyber attacks across Group operates in various diverse and developing markets, the Etisalat network and IT infrastructure is ever-present, it is faced with ongoing regulatory and legal challenges. particularly across the Middle East and North Africa (MENA) Governments and regulatory agencies can alter existing region. Network and IT security teams proactively monitor policies or implement new policies, which can significantly activity across the Group’s networks to identify and mitigate influence Etisalat’s operations and financial performance. possible cyber security threats and data privacy breaches. These challenges are managed by the respective operating

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Emirates Telecommunications Group Company PJSC Abu Dhabi, UAE

Opinion Key Audit Matters We have audited the consolidated financial statements of Emirates Key audit matters are those matters that, in our professional Telecommunications Group Company PJSC (“the Company”) and judgement, were of most significance in our audit of the its subsidiaries (together, the “Group”) set out on pages 82 to150, consolidated financial statements of the current period. These which comprise the consolidated statement of financial position matters were addressed in the context of our audit of the as at 31 December 2017, and the consolidated statements of profit consolidated financial statements as a whole, and in forming our or loss, comprehensive income, changes in equity and cash flows opinion thereon, and we do not provide a separate opinion on for the year then ended and, notes to the financial statements, these matters. including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2017 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), together with other ethical requirements that are relevant to our audit of the consolidated financial statements in the United Arab Emirates, and we have fulfilled our other ethical responsibilities in accordance with these requirements and IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Independent Auditor’s Report (Continued) Independent Auditor’s Report (Continued) Key Audit Matters (continued) Key Audit Matters (continued)

Key Audit Matter How our audit addressed the key audit matter Key Audit Matter How our audit addressed the key audit matter Accuracy and completeness of revenue recognised Our audit approach included a combination of controls Federal royalty computation In responding to this risk, our key audit procedures and related IT systems testing, data analytics and substantive procedures included: covering the following: In accordance with the UAE Cabinet of Ministers decision The Group reported revenue of AED 51,666 million from 320/15/23 of 2012, the UAE Ministry of Finance (“MOF”) • testing the relevant controls around the calculation telecommunication and related activities. • understanding the significant revenue processes guidelines dated 25 February 2015 (the “Guidelines”), subsequent of the federal royalty charge; including performance of an end to end walkthrough correspondences and the new royalty scheme of 2017 announced • meeting with management and reviewing The application of revenue recognition accounting standards is of the revenue assurance process and identifying the by the UAE MOF, the Group has a total of AED 5.74 billion of correspondence exchanged between management complex and involves a number of key judgements and estimates, relevant controls (including IT systems, interfaces and federal royalty payable as of 31 December 2017. and the MOF; including those applied on revenue arrangements with multiple reports); • assessing the reasonableness of the judgements made elements and those contracts where there is existence of principal • testing the design and operating effectiveness of the As stated in note 3 to the consolidated financial statements, in the computation of the federal royalty for the and agent relationship. relevant controls; the Company has made certain significant judgments for the current year based on the Guidelines and subsequent • involving our internal IT specialists to test IT general computation of federal royalty. correspondence; Due to the estimates and judgement involved in the application of controls, system interfaces, data/information • evaluating the classification of regulated and non- the revenue recognition accounting standards and the degree of reporting and application specific controls Accordingly, the computation of the federal royalty for the year regulated revenues in the computation for the federal complexity of IT systems and processes used, we have considered surrounding relevant revenue systems; ended 31 December 2017 is considered to be a key audit matter. royalty on the UAE telecom operations; this matter as a key audit matter. • reviewing significant new contracts and regulatory • testing the allocation of indirect costs on non- determinations, the accounting treatments opted and regulated activities based on clarifications received The Group’s accounting policies relating to revenue recognition testing the related revenues recognised during the from MOF; are presented in note 2 to the consolidated financial statements. period; • evaluating the exclusion of items which are not • testing the nature and accounting for a sample of subject to the computation of federal royalty payable discounts. based on the Guidelines and clarifications received; • performing data analysis and analytical reviews of • evaluating the accumulated annual accounting losses significant revenue streams; which have been offset from the profit for the year • reviewing key reconciliations performed by the used in computing the federal royalty payable; and Revenue Assurance team; • reviewing the arithmetical accuracy of the • performing specific procedures to test the accuracy computation of the federal royalty for the year. and completeness of adjustments relating to multiple element arrangements and grossing up certain revenue and costs; and • performing procedures to ensure that the revenue recognition criteria adopted by each group entity for all major revenue streams is appropriate and in line with the Group’s accounting policies.

Through our instructions, supervision and review, the auditors of the Group’s significant entities performed consistent audit procedures on revenue.

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Independent Auditor’s Report (Continued) Independent Auditor’s Report (Continued) Key Audit Matters (continued) Key Audit Matters (continued)

Key audit matter How our audit addressed the key audit matter Key audit matter How our audit addressed the key audit matter Carrying value of goodwill and the Company’s investments We focused our testing on the impairment of goodwill of Provisions and contingent liabilities We evaluated the design and tested the operating certain specific subsidiaries and investments and on the key effectiveness of the relevant controls and assessed how the The Group’s goodwill amounting to AED 14,803 million represents assumptions and estimates made by management. The Group operates across a large number of jurisdictions and is Group monitors legal, tax and regulatory developments and 11.5% of its total assets. Our audit procedures included an assessment of the subject to a number of legal, regulatory and tax cases. their assessment of the potential impact on the Group. controls over the impairment assessment process. For the cash generating units (CGUs) which contain goodwill, We evaluated the design and tested the operating The level of judgement required to establish the level of We read the summary of litigation matters provided by the determination of the recoverable amount of these CGUs effectiveness of the relevant controls. We also engaged our provisioning, increases the risk that provisions and contingent the Group’s Legal Counsel Team and discussed each of the requires significant estimates in determining the key assumptions internal specialists in carrying out the below procedures: liabilities may not be appropriately provided against or adequately material cases noted in the report to determine the Group’s supporting the expected future cash flows of the business, disclosed. assessment of the likelihood and magnitude of any liability the utilisation of the relevant assets and the most appropriate • Evaluating whether the approach and methodology that may arise. discount rate. used by management to calculate the value in use of Accordingly, this matter is considered to be a key audit matter. each CGU complies with IAS 36 Impairment of Assets. We reviewed the reports from the auditors and obtained Please refer to note 9 to the consolidated financial statements for • Obtained and analysed the business plans provided Management’s disclosures with regards to contingent liabilities legal confirmation, where applicable, for significant group details of management’s impairment test and assumptions. by management for each subject asset to determine are presented in note 33 to the consolidated financial statements. entities and held discussions regarding the material cases whether the forecast cash flows are reasonable and with their auditors and their management. supportable based on historical performance; • Analysed the discount rates calculated by We read, where applicable, external legal or regulatory management and calculated Weighted Average Cost advice sought by the Group and reviewed related of Capital (WACC) independently and compared with correspondence and minutes of executive meetings. management’s calculations; • Assessed long term growth rates for reasonableness In light of the above, we reviewed the level of provisions by reference to growth in GDP and projected inflation recorded and assessed the adequacy of disclosures in the rates; and consolidated financial statements. • Assessed the reasonableness of key cash flow assumptions based on historical performance and industry information.

We performed sensitivity analysis around the key assumptions used by management to ascertain the extent of change in those assumptions that either individually or collectively would be required for an additional impairment charge. We also assessed the appropriateness of the related disclosures of goodwill and investments.

78 79 ETISALAT GROUP | ANNUAL REPORT 2017

Independent Auditor’s Report (Continued) Independent Auditor’s Report (Continued) Auditor’s Responsibilities for the Audit of the Consolidated Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements (continued) Financial Statements (continued)

to events or conditions that may cast significant doubt on the of doing so would reasonably be expected to outweigh the public Other Information Those charged with governance are responsible for overseeing the Group’s ability to continue as a going concern. If we conclude interest benefits of such communication. Management is responsible for the other information. The other Group’s financial reporting process. that a material uncertainty exists, we are required to draw information comprises the Chairman’s statement, CEO statement attention in our auditor’s report to the related disclosures in Report on Other Legal and Regultory Requirements and the other information in the annual report, which we obtained Auditor’s Responsibilities for the Audit of the Consolidated the consolidated financial statements or, if such disclosures are Further, as required by the UAE Federal Law No. (2) of 2015, prior to the date of this auditors’ report and the annual report, Financial Statements inadequate, to modify our opinion. Our conclusions are based we report that: which is expected to be made available to us after that date. The Our objectives are to obtain reasonable assurance about whether the on the audit evidence obtained up to the date of our auditors’ i. We have obtained all the information we considered necessary other information does not include the consolidated financial consolidated financial statements as a whole are free from material report. However, future events or conditions may cause the for the purposes of our audit; statements and our auditor’s report thereon. misstatement, whether due to fraud or error, and to issue an auditor’s Group to cease to continue as a going concern. ii. The consolidated financial statements have been prepared and report that includes our opinion. Reasonable assurance is a high • Evaluate the overall presentation, structure and content of the comply, in all material respects, with the applicable provisions of Our opinion on the consolidated financial statements does not cover level of assurance, but is not a guarantee that an audit conducted consolidated financial statements, including the disclosures, and the UAE Federal Law No. (2) of 2015; the other information and we do not express any form of assurance in accordance with ISAs will always detect a material misstatement whether the consolidated financial statements represent the iii. The Group has maintained proper books of account; or conclusion thereon. when it exists. Misstatements can arise from fraud or error and are underlying transactions and events in a manner that achieves iv. The financial information included in the Chairman’s statement is considered material if, individually or in the aggregate, they could fair presentation. consistent with the books of account of the Group; In connection with our audit of the consolidated financial reasonably be expected to influence the economic decisions of users • Obtain sufficient appropriate audit evidence regarding the v. As disclosed in note 13 and 15 to the consolidated financial statements, our responsibility is to read the other information and, taken on the basis of these consolidated financial statements. financial information of the entities or business activities within statements, the Group has further invested in shares during the in doing so, consider whether the other information is materially the Group to express an opinion on the consolidated financial financial year ended 31 December 2017; inconsistent with the consolidated financial statements or our As part of an audit in accordance with ISAs, we exercise statements. We are responsible for the direction, supervision and vi. Note 17 to the consolidated financial statements discloses knowledge obtained in the audit, or otherwise appears to be professional judgement and maintain professional skepticism performance of the group audit. We remain solely responsible for material related party transactions and balances, and the terms materially misstated. If, based on the work we have performed on throughout the audit. We also: our audit opinion. under which they were conducted; the other information that we obtained prior to the date of this vii. Based on the information that has been made available to us auditor’s report, we conclude that there is a material misstatement • Identify and assess the risks of material misstatement of the We communicate with those charged with governance regarding, nothing has come to our attention which causes us to believe of this other information, we are required to report that fact. We consolidated financial statements, whether due to fraud or error, among other matters, the planned scope and timing of the audit and that the Group has contravened during the financial year ended have nothing to report in this regard. design and perform audit procedures responsive to those risks, significant audit findings, including any significant deficiencies in 31 December 2017 any of the applicable provisions of the UAE and obtain audit evidence that is sufficient and appropriate internal control that we identify during our audit. Federal Law No. (2) of 2015 or in respect of the Company, its Responsibilities of Management and Those Charged with to provide a basis for our opinion. The risk of not detecting a Articles of Association which would materially affect its activities Governance for the Consolidated Financial Statements material misstatement resulting from fraud is higher than for We also provide those charged with governance with a statement or its financial position as at 31 December 2017; and Management is responsible for the preparation and fair presentation one resulting from error, as fraud may involve collusion, forgery, that we have complied with relevant ethical requirements regarding viii. Note 5 to the consolidated financial statements discloses of the consolidated financial statements in accordance with intentional omissions, misrepresentations, or the override of independence, and to communicate with them all relationships the social contributions made during the financial year International Financial Reporting Standards and the requirements of internal control. and other matters that may reasonably be thought to bear on our ended 31 December 2017 the UAE Federal Law No. (2) of 2015, and for such internal control • Obtain an understanding of internal control relevant to the audit independence, and where applicable, related safeguards. as management determines is necessary to enable the preparation in order to design audit procedures that are appropriate in the DELOITTE & TOUCHE (M.E.) of consolidated financial statements that are free from material circumstances, but not for the purpose of expressing an opinion From the matters communicated with those charged with misstatement, whether due to fraud or error. on the effectiveness of the Group’s internal control. governance, we determine those matters that were of most • Evaluate the appropriateness of accounting policies used and the significance in the audit of the consolidated financial statements In preparing the consolidated financial statements, management reasonableness of accounting estimates and related disclosures of the current period and are therefore the key audit matters. We Signed by: is responsible for assessing the Group’s ability to continue as a made by management. describe these matters in our auditors’ report unless law or regulation Rama Padmanabha Acharya going concern, disclosing, as applicable, matters related to going • Conclude on the appropriateness of management’s use of the precludes public disclosure about the matter or when, in extremely Registered Auditor Number 701 concern and using the going concern basis of accounting unless going concern basis of accounting and based on the audit rare circumstances, we determine that a matter should not be 20 February 2018 management either intends to liquidate the Group or to cease evidence obtained, whether a material uncertainty exists related communicated in our report because the adverse consequences Abu Dhabi, United Arab Emirates operations, or have no realistic alternative but to do so.

80 81 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Consolidated statement of profit or loss for the year ended 31 December 2017 Consolidated statement of comprehensive income for the year ended 31 December 2017

2017 2016 2017 2016 Notes AED’000 AED’000 Notes AED’000 AED’000

Continuing operations Profit for the year 9,772,317 9,487,062 Revenue 4 51,666,431 52,360,037

Operating expenses 5 33,241,479 (34,154,904) Other comprehensive (loss) / income 10 (765,205) (1,077,131) Impairment and other losses Items that will not be reclassified subsequently to profit or loss: Share of results of associates and joint ventures 14 (207,280) (101,350) Remeasurement of defined benefit obligations - net of tax (48,076) (2,275) Operating profit before federal royalty 17,452,467 17,026,652 Net fair value gain on investment in equity instruments designated 3,920 - as FVTOCI Federal royalty 5 (6,038,912) (5,010,127)

Operating profit 11,413,555 12,016,525 Items that may be reclassified subsequently to profit or loss: Finance and other income 6 1,174,466 1,020,105 Exchange differences arising during the year Finance and other costs 7 (1,380,569) (1,912,144)

Profit before tax 11,207,452 11,124,486 Exchange differences on translation of foreign operations 1,454,227 (5,159,212) (Loss)/gain on hedging instruments designated in hedges of the 24 (1,148,302) 250,656 Taxation 8 (1,240,988) (1,205,513) net assets of foreign operations Profit for the year from continuing operations 9,966,464 9,918,973 Fair value gain arising on cash flow hedge during the year 2,477 - Discontinued operations 36 (194,147) (431,911) Loss from discontinued operations Loss on revaluation of financial assets during the year - (142,520)

Profit for the year 9,772,317 9,487,062 Items reclassified to profit or loss: Profit attributable to: Reclassification adjustment relating to available-for-sale - 194,759 The equity holders of the Company 8,444,437 8,421,185 financial assets impaired during the year Reclassification adjustment relating to available-for-sale 30 - (2,838) Non-controlling interests 1,327,880 1,065,877 financial assets on disposal Cumulative gain transferred to profit or loss on disposal 37 - 505,820 9,772,317 9,487,062 of foreign operation

Earnings per share Total other comprehensive gain/ (loss) 264,246 (4,355,610)

From continuing and discontinuing operations

Basic and diluted 35 AED 0.97 AED 0.97 Total comprehensive income for the year 10,036,563 5,131,452

Attributable to:

From continuing operations The equity holders of the Company 8,307,783 5,826,390 Basic and diluted 35 AED 0.99 AED 1.02 Non-controlling interests 1,728,780 (694,938)

10,036,563 5,131,452

Chairman Board Member

The accompanying notes on pages 87 to 150 form an integral part of these consolidated financial statements. The accompanying notes on pages 87 to 150 form an integral part of these consolidated financial statements. The Independent Auditor’s report is set out on pages 75 to 81. The Independent Auditor’s report is set out on pages 75 to 81.

82 83 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Consolidated statement of financial position as at 31 December 2017 Consolidated statement of changes in equity the year ended 31 December 2017

2017 2016 Attributable to equity holders of the Company Notes AED’000 AED’000 Non-current assets Share Retained Owners’ Non-controlling Total Goodwill 9 14,803,324 14,097,902 Capital Reserves earnings Equity interests equity Other intangible assets 9 15,437,454 14,710,048 Notes AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Property, plant and equipment 11 43,806,335 42,450,127 Investment property 12 40,125 27,230 8,696,754 27,583,414 7,506,616 43,786,784 15,886,048 59,672,832 Investments in associates and joint ventures 15 4,306,733 4,414,352 Balance at 1 January 2016 Other investments 16 1,701,144 879,207 Other receivables 19 237,041 156,612 Total comprehensive income - )2,593,846( 8,420,236 5,826,390 )694,938( 5,131,452 Finance lease receivables 20 209,491 - for the year Derivative financial instruments 24 10,481 331,313 Deferred tax assets 8 94,135 128,210 Other movements in equity - - )4,704( )4,704( )4,853( )9,557( 80,646,263 77,195,001 Current assets Transfer to reserves 30 - 1,131,581 )1,131,581( - - - Inventories 18 541,290 708,825 Trade and other receivables 19 18,453,793 18,913,091 Current income tax assets 673,889 593,270 Transactions with owners: Finance lease receivables 20 38,223 - Due from related parties 17 187,242 440,643 Disposal of a subsidiary 37 - - - - )27,477( )27,477( Cash and bank balances 21 27,125,158 23,676,170 47,019,595 44,331,999 Movements in non-controlling 13 - - 47,330 47,330 )66,843( )19,513( interests Assets classified as held for sale 36 618,247 993,663 Repayment of advances to 13 - - - - )78,843( )78,843( Total assets 128,284,105 122,520,663 non-controlling interests Non-current liabilities Other payables 22 1,477,540 1,558,549 Dividends 34 - - )6,954,396( )6,954,396( )1,799,720( )8,754,116( Borrowings 23 20,035,133 18,203,902 Payables related to investments and licenses 25 90,353 542,968 Deferred tax liabilities 8 3,205,407 3,255,952 Balance at 31 December 2016 8,696,754 26,121,149 7,883,501 42,701,404 13,213,374 55,914,778 Finance lease obligations 26 1,909 4,905 Provisions 27 187,566 149,143 Balance at 1 January 2017 8,696,754 26,121,149 7,883,501 42,701,404 13,213,374 55,914,778 Provision for end of service benefits 28 1,608,782 1,636,959 26,606,690 25,352,378 Total comprehensive income - )126,747( 8,434,530 8,307,783 1,728,780 10,036,563 Current liabilities for the year Trade and other payables 22 32,809,580 30,772,494 23 4,670,208 4,074,738 Borrowings Other movements in equity - - )12,588( )12,588( )13,786( )26,374( Payables related to investments and licenses 25 3,269,516 3,255,327 Current income tax liabilities 225,282 257,492 Derivative financial instruments 24 79,149 2,830 Transfer to reserves 30 - 1,042,121 )1,042,121( - - - Finance lease obligations 26 3,273 5,512 Provisions 27 2,509,251 2,488,839 43,566,259 40,857,232 Transactions with owners:

Liabilities directly associated with the assets classified as held for sale 36 407,181 396,275 Capital contribution by 13 - - - - 284,171 284,171 non-controlling interest Total liabilities 70,580,130 66,605,885 Repayment of advances to 13 - - - - )76,091( )76,091( Net assets 57,703,975 55,914,778 non-controlling interests Equity Transfer from investment revaluation Share capital 29 8,696,754 8,696,754 30 )47,687( 47,687 - - - Reserves 30 26,988,836 26,121,149 reserve to retained earnings on Retained earnings 8,356,613 7,883,502 application of IFRS 9 Equity attributable to the equity holders of the Company 44,042,203 42,701,405 Dividends 34 - - )6,954,396( )6,954,396( )1,474,676( )8,429,072( Non-controlling interests 13 13,661,772 13,213,373 Total equity 57,703,975 55,914,778 Balance at 31 December 2017 8,696,754 26,988,836 8,356,613 44,042,203 13,661,772 57,703,975

Chairman Board Member The accompanying notes on pages 87 to 150 form an integral part of these consolidated financial statements. The accompanying notes on pages 87 to 150 form an integral part of these consolidated financial statements. The Independent Auditor’s report is set out on pages 75 to 81. The Independent Auditor’s report is set out on pages 75 to 81.

84 85 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Consolidated statement of cash flows for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2017 2016 1. General information zone corporate entities, or corporate entities of the UAE that are Notes AED’000 AED’000 not fully controlled by UAE citizens ) may own up to 20% of the The Emirates Telecommunications Group (‘’the Group’’) comprises Operating profit including discontinued operations 11,236,233 11,958,114 Company’s ordinary shares, however the shares owned by such Adjustments for: the holding company Emirates Telecommunications Group persons / entities shall not hold any voting rights in the Company’s Depreciation 11, 12 5,651,197 5,895,574 Company PJSC (‘‘the Company’’), formerly known as Emirates Amortisation 9 1,632,788 1,783,013 general assembly (however, holders of such shares may attend Impairment and other losses 10 772,596 1,077,123 Telecommunications Corporation (“the Corporation”) and its such meeting). Share of results of associates and joint ventures 14 207,280 101,350 subsidiaries. The Corporation was incorporated in the United Provisions and allowances 205,364 1,211,792 Arab Emirates (“UAE”), with limited liability, in 1976 by UAE Unrealised currency translation gain/(loss) 424,555 (161,052) The address of the registered office is P.O. Box 3838, Abu Dhabi, Other non-cash movements 258,214 153,071 Federal Government decree No. 78, which was revised by the Operating profit before changes in working capital 20,388,227 22,018,985 United Arab Emirates. The Company’s shares are listed on the Abu UAE Federal Act No. (1) of 1991 and further amended by Decretal Changes in working capital: Dhabi Securities Exchange. Inventories 174,587 166,661 Federal Code No. 3 of 2003 concerning the regulation of the Due from associates and joint ventures 73,638 168,447 telecommunications sector in the UAE. In accordance with Federal Trade and other receivables 533,533 (2,516,489) The principal activities of the Group are to provide 932,660 1,275,358 Law No. 267/10 for 2009, the Federal Government of the UAE Trade and other payables telecommunications services, media and related equipment Cash generated from operations 22,102,645 21,112,962 transferred its 60% holding in the Corporation to the Emirates Income taxes paid (1,550,580) (1,650,564) including the provision of related contracting and consultancy Investment Authority with effect from 1 January 2008, which is Payment of end of service benefits 28 (245,613) (536,426) services to international telecommunications companies Net cash generated from operating activities 20,306,452 18,925,972 ultimately controlled by the UAE Federal Government. Cash flows from investing activities and consortia. These activities are carried out through the Acquisition of other investments - (76,845) Company (which holds a full service license from the UAE Proceeds on disposal of investment classified as FVTOCI 59,161 - The Decree by Federal Law no. 3 of 2015 (the New Law”) has Telecommunications Regulatory Authority valid until 2025), its Proceeds from disposal of investments at amortised cost/held-to-maturity investments 329,682 363,845 amended certain provisions of the Federal Law No. 1 of 1991 and Acquisition of investments at amortised cost/held-to-maturity investments (219,693) (949,956) subsidiaries, associates and joint ventures. Acquisition of investment classified as fair value through profit or loss (790,574) - new articles of association of Emirates Telecommunications Group Acquisition of investments classified as FVTOCI (57,506) - Company PJSC (the “New AoA”) have been issued. Subsequent to Proceeds from disposal of investments classified as fair value through profit or loss 12,701 - These consolidated financial statements were approved by the the New Law and the New AoA, Emirates Telecommunications Acquisition of interest in associates (106,484) - Board of Directors and authorised for issue on 20th February 2018. Purchase of property, plant and equipment (7,365,144) (7,728,741) Corporation has been converted from a corporation to a public Proceeds from disposal of property, plant and equipment 56,206 387,315 joint stock company and made subject to the provisions of Purchase of other intangible assets (675,000) (2,829,037) 2. Significant accounting policies Proceeds from disposal of other intangible assets 3,012 168 UAE Federal Law no. 2 of 2015 on Commercial Companies (the Term deposits made with maturities over three months 21 (18,474,475) (19,877,006) “Companies Law”) unless otherwise stated in the New Law or Term deposits matured with maturities over three months 21 15,891,605 15,151,942 The significant accounting policies adopted in the preparation of New AoA. Accordingly, the name of the corporation has been Dividend income received from associates and other investments 22,024 17,451 these consolidated financial statements are set out below. Net cash inflow/(outflow) on disposal of a subsidiary - 279,033 changed to Emirates Telecommunications Group Company PJSC. Proceeds from unwinding of derivative financial instruments 173,101 282,898 Under the New Law and the New AoA: i) Two types of share have Finance and other income received 990,624 892,571 Basis of preparation Net cash used in investing activities (10,150,760) (14,086,362) been introduced, ie ordinary shares and one Special Share held The consolidated financial statements of the Group have been Cash flows from financing activities by the Emirates Investment Authority (an agency of the federal Proceeds from borrowings and finance lease obligations 3,558,667 6,592,277 prepared in accordance with International Financial Reporting Government of the United Arab Emirates) which carries certain Repayments of borrowings and finance lease obligations (2,954,075) (4,351,860) Standards (“IFRS”) applicable to companies reporting under IFRS Repayment of advances to non-controlling interests (76,091) (78,843) preferential rights related to the passing of certain decisions by Capital contribution by non controlling interests 284,171 - and the applicable provisions of UAE Federal Law No. (2) of 2015. the company or the ownership of the UAE telecommunication Dividends paid (8,428,988) (8,754,090) The preparation of financial statements in conformity with IFRS Finance and other costs paid (1,410,337) (1,133,017) network. ii) the minimum number of ordinary shares held by any requires the use of certain critical accounting estimates. It also Net cash used in financing activities (9,026,653) (7,725,533) UAE government entity in the Company has been reduced from Net increase/(decrease) in cash and cash equivalents 1,129,040 (2,885,923) requires management to exercise its judgement in the process at least 60% of the Company’s share capital not less than 51%, Cash and cash equivalents at the beginning of the year 3,022,906 5,553,300 of applying the Group’s accounting policies. The areas involving Effects of foreign exchange rate changes (288,378) 355,529 unless the Special Shareholder decides otherwise; iii). shareholders Cash and cash equivalents at the end of the year 21 3,863,568 3,022,906 a higher degree of judgement or complexity, or areas where who are not public entities of the UAE, citizens of the UAE, or assumptions and estimates are significant to the consolidated In the previous year, the Group disposed of a property in one of its subsidiaries having a non cash impact of AED 153 million. corporate entities of the UAE wholly controlled by citizens of financial statements are disclosed in note 3. The consolidated During the year, the Group concluded swap of certain property, plant and equipment having non-cash impact of AED 220.13 million. the UAE, (which includes foreign individuals, foreign or UAE free The accompanying notes on pages 87 to 150 form an integral part of these consolidated financial statements. The Independent Auditor’s report is set out on pages 75 to 81. financial statements are prepared under the historical cost

86 87 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued) Basis of preparation (continued) convention except for the revaluation of certain financial basis of the Group’s business model for managing the financial value through OCI under IFRS 9 has resulted in the fair value to financial liabilities, application of IFRS 9 has had no material instruments and in accordance with the accounting policies set assets and the contractual cash flow characteristics of the gain on available-for-sale financial assets recognized in other impact on the Group, and the Group has continued to apply its out herein. financial assets. Management reviewed and assessed the Group’s comprehensive income of AED 3.4 million that will not be previous accounting policies for classification and measurement of existing financial assets as at 1 January 2017 based on the facts subsequently reclassified to the consolidated statement of profit financial liabilities. Historical cost is generally based on the fair value of the and circumstances that existed at that date and concluded that or loss. consideration given in exchange for goods and services. Fair the initial application of IFRS 9 has had the following impact on The tables below shows only information relating to financial value is the price that would be received to sell an asset or paid the Group’s financial assets as regards to their classification and None of the other reclassifications of financial assets have had assets that have been reclassified as a result of transition to IFRS to transfer a liability in an orderly transaction between market measurement: any material impact on the Group’s consolidated statement of 9. For all other financial assets and liabilities, there has been no participants at the measurement date, regardless of whether the • Financial assets classified as held-to-maturity and loans and financial position, profit or loss, other comprehensive income or impact on early adoption of IFRS 9. price is directly observable or estimated using another valuation receivables under IAS 39 that were measured at amortised total comprehensive income for the current period. In relation technique. cost continue to be measured at amortised cost under IFRS 9 as they are held within a business model to collect Impact for IFRS 9 (AED’000) The consolidated financial statements are presented in contractual cash flows and these cash flows consist solely of UAE Dirhams (AED) which is the Company’s functional and payments of principal and interest on the principal amount Original classification New classification Original carrying New carrying amount Reclassification Remeasurement presentational currency, rounded to the nearest thousand except outstanding; under IAS 39 under IFRS 9 amount under IAS 39 under IFRS 9 where otherwise indicated. • Equity investments classified as available for sale (AFS) under IAS 39, have irrevocably been classified as fair value through FVTPL FVTPL 48,183 - - 48,183 Impact of early adoption of IFRS 9 OCI, except those equity investments amounting to AED Available -for -sale FVTOCI 201,744 - - 201,744 Financial Instruments 280.6 million as at 1 January 2017 which are held for trading Available -for -sale FVTPL 280,643 - - 280,643 International Accounting Standard Board (IASB) published purposes. Accordingly these securities classified as FVTOCI are Held to maturity At amortised cost 348,637 - - 348,637 its final version of IFRS 9 Financial Instruments in July 2014 measured at fair value through other comprehensive income, which replaces IAS 39 Financial instruments: Recognition and and any accumulated gains and losses held within OCI are Measurement. In the current year, the Group has early adopted not recycled through the consolidated statement of profit contracts to which the impairment requirements of IFRS 9 ii. Impairment of financial assets IFRS 9 Financial Instruments (as revised in July 2014) and the or loss. Those equity investments which are held for trading apply. In particular, IFRS 9 requires the Group to measure the In relation to the impairment of financial assets, IFRS 9 requires related consequential amendments to the other IFRSs with effect purposes are classified as fair value through profit and loss. loss allowance for a financial instrument at an amount equal to an Expected Credit Loss (“ECL”) model as opposed to an incurred from 1 January 2017. The Group has elected not to restate the The accumulated gains and losses relating to these equity the lifetime ECL if the credit risk on that financial instrument credit loss model under IAS 39. The expected credit loss model prior year reported numbers inline with the relief under IFRS instruments on the date of initial application amounting has increased significantly since initial recognition, or if the requires the Group to account for expected credit losses and 9. IFRS 9 introduces new requirements for i) the classification to AED 47.7 million have been transferred from investment financial instrument is a purchased or originated credit-impaired changes in those expected credit losses at the end of each and measurement of financial assets and financial liabilities, ii) revaluation reserve to retained earnings. Subsequently gains financial asset. On the other hand, if the credit risk on a financial reporting period to reflect changes in credit risk since initial impairment for financial assets and iii) general hedge accounting. and losses relating to those equity investments amounting to instrument has not increased significantly since initial recognition, recognition of the financial assets. It is no longer necessary for a AED 78.1 million are recognised in the consolidated statement the Group is required to measure the loss allowance for that credit event to have occurred before credit losses are recognised. Details of these new requirements as well as their impact on the of profit or loss. financial instrument at an amount equal to 12 month ECL. IFRS 9 Group’s consolidated financial statements are described below: • Financial assets that were measured at FVTPL under IAS provides a simplified approach for measuring the loss allowance Specifically, IFRS 9 requires the Group to recognise a loss 39 continue to be measured as such under IFRS 9 as these at an amount equal to lifetime ECL for trade receivables, and allowance for expected credit losses on all classes of financial i. Classification and measurement of financial assets and investments are managed as a trading portfolio and the contract assets in certain circumstances. Accordingly the Group assets, other than those that are measured as fair value through financial liabilities settlement is designed based on the changes in fair value of has adopted a simplified approach for assessing the impairment profit or loss and equity instruments classified and measured as The Group has applied the requirements of IFRS 9 to financial the underlying securities rather than for collecting principal for trade and other receivables, lease receivables and contract FVTOCI. The financial assets subject to impairment requirements instruments that have not been derecognized as at the initial and interest. assets (upon adoption of IFRS 15). For financial assets other than of IFRS 9, include: i) debt investments subsequently measured application date i.e 1 January 2017. All recognised financial trade receivables and contract assets, the Group will calculate ECL at amortised cost or at FVTOCI, ii) lease receivables, iii) contract assets that are within the scope of IFRS 9 are required to be The change in classification of the Group’s investments in using the general approach. assets and iv) loan commitments and financial guarantee subsequently measured at amortised cost or fair value on the equity instruments from available for sale under IAS 39 to fair

88 89 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued) ii. Impairment of financial assets (continued)

As at 1 January 2017, management reviewed and assessed the not had any material impact on the amounts reported for the added in IFRS 15 to deal with specific scenarios and extensive Adjustment to the transaction price Group’s existing financial assets for impairment using reasonable current and prior periods but may affect the accounting for future disclosures are required by IFRS 15. In April 2016, the IASB Adjustment of significant financing component and supportable information that is available without incurring transactions or arrangements. issued Clarifications to IFRS 15 in relation to the identification of Significant financing component exists if the timing of payments undue cost or effort, in accordance with the guidance included performance obligations, principal versus agent considerations, as agreed to by the parties to the contract (either explicitly or in IFRS 9, to determine the credit risk associated with the • Ammendments to IAS 7 Statement of Cash Flows relating to well as licensing application guidance. implicitly) provides the customer or the Group with a significant respective financial assets. In relation to financial assets subject disclosure initiatives benefit of financing the transfer of goods or services to the to impairment provisions under IFRS 9, other than trade and other • Amendments to IFRS 12 Disclosure of Interests in Other The potential impact of the revenue standard for the Group are customer. In such circumstances, the contract contains a receivables, lease receivables and contract assets, there is no Entities resulting from Annual Improvements to IFRS 2014– expected to be as follows: significant financing component. material impact on the carrying values. 2016 Cycle regarding clarifying the scope of the standard. • Ammendments to IAS 12 Income Taxes regarding the Determination of Distinct Performance Obligations (POs) The Group is expected to have significant financing component The adoption of IFRS 9 has resulted in an increase in the recognition of deferred tax assets for unrealised losses Sale of SIM Cards in arrangements involving provision of equipment and devices on consolidated profit by AED 97 million. At the date of the consolidated financial statements, the following Sale of SIM cards represent a distinct PO to connect the installment plans. Standards, Amendments and Interpretations have not been customers to Etisalat network and therefore revenue is New and amended standards adopted by the Group effective and have not been early adopted: recognised at the point in time when the SIM card is sold and Variable Consideration The following revised IFRSs have been adopted in this consolidated service is activated. Certain customer contracts include variable discounts and financial statements. The application of these revised IFRSs has concessions, which are provided to the customers during the Loyalty points programme contract period. Variability arises due to contractual terms and EFFECTIVE DATE Under IFRIC 13 Customer Loyalty Programme, the loyalty conditions, whereby customers are provided discounts upon IFRS 15 – Revenue from contracts with customers 1 January 2018 programme offered by the Group results in the allocation of a reaching certain volume thresholds. In addition to the contractual IFRS 16 Leases 1 January 2019 portion of the transaction price to the loyalty programme using terms, the Group also provides goodwill adjustments or service Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ven- Effective date the fair value of points issued and recognition of the deferred credits to certain customers in accordance with its customary tures (2011) relating to the treatment of the sale or contribution of assets from and investor to its associate or joint deferred indefinitely venture deferred indefinitely revenue in relation to points issued but not yet redeemed or business practices. 2016 Amendments to IFRS 1 and IAS 28 resulting from annual Improvements 2014 Cycle. 1 January 2018 expired. The Group concluded that under IFRS 15 the loyalty IFRIC 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 programme gives rise to a separate performance obligation Under IFRS 15, if consideration promised in the contract (either IFRIC 23 Uncertainty Over Tax Treatments 1 January 2019 because it generally provides a material right to the customer. explicit or implicit) includes a variable amount, then an entity Under IFRS 15, the Group will need to allocate a portion of the shall estimate the amount and adjust the total transaction price Annual Improvements to IFRS 2015 – 2017 Cycle amending IFRS 3, IFRS 11, IAS 12 and IAS 23. 1 January 2019 transaction price to the loyalty programme based on relative at contract inception. This will result in the change in timing of Amendments to IAS 28 Investments in Associates and Joint Ventures regarding long-term interests in associates 1 January 2019 and joint ventures. standard standalone price (SSP). revenue recognition.

• Step 1: Identify the contract(s) with a customer. IFRS 15 Revenue from Contracts with Customers: Set-up and Installation fees Allocating the transaction price • Step 2: Identify the performance obligations in the contract. IFRS 15 establishes a single comprehensive model for entities Generally, the Group charges upfront set-up and installation Allocation based on the ratio of relative SSP of distinct PO: • Step 3: Determine the transaction price. to use in accounting for revenue arising from contracts with fees for various consumer and business products. Under IAS The transaction price is allocated between POs based on relative • Step 4: Allocate the transaction price to the performance customers. IFRS 15 will supersede the current revenue recognition 18, revenue was recognised upfront when the installation SSP as determined at contract inception. obligations in the contract. guidance including IAS 18 Revenue, IAS 11 Construction Contracts was completed. Under IFRS 15, the installation service is not • Step 5: Recognise revenue when (or as) the entity satisfies a and the related interpretations when it becomes effective. The considered a distinct PO. Hence, one-time fee pertaining to set- Since the amount of revenue recognised for distinct POs will performance obligation. core principle of IFRS 15 is that an entity should recognise up and installation is added to the total transaction price and often be dependent on the relative SSP, the determination of revenue to depict the transfer of promised goods or services to recognised over the period of service, resulting in a change in appropriate SSP is critical. The SSP of a performance obligation Under IFRS 15, an entity recognises when (or as) a performance customers in an amount that reflects the consideration to which timing of revenue recognition. is the observable price for the good or service sold by Etisalat in obligation is satisfied, i.e. when ‘control’ of the goods or services the entity expects to be entitled in exchange for those goods or similar circumstances to similar customers. underlying the particular performance obligation is transferred services. Specifically, the standard introduces a 5-step approach to to the customer. Far more prescriptive guidance has been revenue recognition:

90 91 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued)

Contract Cost Basis of consolidation Business combinations agreed sharing of control of an arrangement, which exists only when Costs to acquire and cost to fulfill a contract These consolidated financial statements incorporate the financial The acquisition of subsidiaries is accounted for using the decisions about the relevant activities require unanimous consent In 2017, contract costs related to commission (cost to acquire) statements of the Company and entities controlled by the acquisition method. The cost of an acquisition is measured as of the parties sharing control. Associates are those companies over and installation service (cost to fulfill) were expensed, as they Company. Control is achieved when the Group has: the aggregate of the fair value, at the date of exchange, of the which Group exercises significant influence but it does not control or did not qualify for recognition as an asset under any of the other • has power over the investee; assets given, equity instruments issued and liabilities incurred have joint control over those companies. Investments in associates accounting standards. However, under IFRS 15, these costs relate • is exposed or has rights, to variable returns from its or assumed. The acquiree’s identifiable assets and liabilities and joint ventures are accounted for using the equity method directly to the contract, generate resources used in satisfying involvement; that meet the conditions for recognition under IFRS 3 Business of accounting except when the investment, or a portion thereof, the contract and are expected to be recovered. Under IFRS 15, • has the ability to use its power to affect its returns. Combinations are recognised at their fair values at the acquisition is classified as held for sale, in which case it is accounted for in these will now be capitalised as contract costs and included in date. Acquisition-related costs are recognised in the consolidated accordance with IFRS 5. Investments in associates and joint ventures contract assets in the consolidated statement of financial position. The existence and effect of potential voting rights that are statement of profit or loss as incurred. are carried in the consolidated statement of financial position at cost Capitalised contract costs are amortised over the customer currently exercisable or convertible are considered when assessing as adjusted by post-acquisition changes in the Group’s share of the contract period for postpaid segment and over customer life cycle whether the Group has the power to control another entity. Goodwill arising on acquisition is recognised as an asset and net assets of the associates and joint ventures less any impairment in (average months) for prepaid segment. initially measured at cost, being the excess of the cost of the the value of individual investments. Losses of the associates and joint Non-controlling interests in the net assets of consolidated business combination over the Group’s interest in the net fair ventures in excess of the Group’s interest are not recognised unless The Group is continuing to assess the impact of these and other subsidiaries are identified separately from the Group’s equity value of the identifiable assets, liabilities and contingent liabilities the Group has incurred legal or constructive obligations. changes on the consolidated financial statements. therein. Non-controlling interests consist of the amount of those recognised. If, after reassessment, the Group’s interest in the interests at the date of the original business combination and the acquisition-date net fair value of the acquiree’s identifiable assets The carrying values of investments in associates and joint IFRS 16 LEASES: non-controlling interests share of changes in equity since the date and liabilities exceeds the cost of the business combination, the ventures are reviewed on a regular basis and if impairment in the IFRS 16 introduces a comprehensive model for the identification of the business combination. Total comprehensive income within excess is recognised immediately in the consolidated statement of value has occurred, it is written off in the period in which those of lease arrangements and accounting treatments for both lessors subsidiaries is attributed to the Group and to the non-controlling profit or loss. circumstances are identified. and lessees. IFRS 16 will supersede the current lease guidance interest even if this results in non-controlling interests having a including IAS 17 leases and the related interpretations when it deficit balance. The non-controlling interest in the acquire is initially measured Any excess of the cost of acquisition over the Group’s share of the becomes effective. at the minority’s proportion of the net fair value of the assets, fair values of the identifiable net assets of the associates at the Subsidiaries are consolidated from the date on which effective liabilities and contingent liabilities recognised. date of acquisition is recognised as goodwill and included as part IFRS 16 distinguishes leases and service contracts on the basis control is transferred to the Group and are excluded from of the cost of investment. Any deficiency of the cost of acquisition of whether an identified asset is controlled by a customer. consolidation from the date that control ceases. Specifically, Step acquisition below the Group’s share of the fair values of the identifiable net Distinctions of operating leases (off balance sheet) and finance income and expenses of a subsidiary acquired or disposed of If the business combination is achieved in stages, the acquisition assets of the associates at the date of acquisition is credited leases (on balance sheet) are removed for lessee accounting during the year are included in the consolidated statement of date carrying value of the acquirer’s previously held equity interest to the consolidated statement of profit or loss in the year of and is replaced by a model where a right-of-use asset and a profit or loss and other comprehensive income from the date the in the acquire is re-measured to fair value at the acquisition acquisition. corresponding liability have to be recognised for leases by lessees Company gains control until the date when the Company ceases date; any gains or losses arising from such re-measurement (i.e. all on balance sheet) except for short-term leases and leases to control the subsidiary. are recognised in the consolidated statement of profit or loss. The Group’s share of associates’ and joint ventures’ results is of low value assets. Amounts arising from interests in the acquire prior to the based on the most recent financial statements or interim financial Intercompany transactions, balances and any unrealised gains/ acquisition date that have previously been recognised in other statements drawn up to the Group’s reporting date. Accounting Management anticipates that the application of the above losses between Group entities have been eliminated in the comprehensive income are reclassified to profit or loss where such policies of associates and joint ventures have been adjusted, Standards and Interpretations in future periods will have no consolidated financial statements. treatment would be appropriate if that interest were disposed of. where necessary, to ensure consistency with the policies adopted material impact on the consolidated financial statements of the by the Group. Group in the period of initial application with the exception of Where necessary, adjustments are made to the financial Associates and joint ventures IFRS 15 Revenue from Contracts with Customers and IFRS 16 statements of subsidiaries to bring the accounting policies used in A joint venture is a joint arrangement whereby the Group has joint Profits and losses resulting from upstream and downstream Leases which management is currently assessing. However, it is not line with those used by the Group. control of the arrangement and has corresponding rights to the transactions between the Groups (including its consolidated practicable to provide a reasonable estimate of the effects of the net assets of the arrangement. Joint control is the contractually subsidiaries) and its associate or joint ventures are recognised in application of IFRS 16 until the Group performs a detailed review.

92 93 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued)

the Group’s financial statements only to the extent of unrelated Incentives are provided to customers in various forms and Leasing In preparing the financial statements of the individual companies, group’s interests in the associates or joint ventures. Losses may are usually offered on signing a new contract or as part of a Leases are classified as finance leases whenever the terms transactions in currencies other than the entity’s functional provide evidence of an impairment of the asset transferred, in promotional offering. Where such incentives are provided on of the lease transfer substantially all the risks and rewards currency are recorded at exchange rates prevailing at the dates which case appropriate provision is made for impairment. connection of a new customer or the upgrade of an existing of ownership to the lessee. All other leases are classified as of the transactions. At end of reporting period, monetary items customer, revenue representing the fair value of the incentive, operating leases. that are denominated in foreign currencies are retranslated into Dilution gains and losses arising on deemed disposal of relative to other deliverables provided to the customer as part of the entity’s functional currency at rates prevailing at that date. investments in associates and joint ventures are recognised in the the same arrangement, is deferred and recognised in line with the i) The Group as lessor Non-monetary items carried at fair value that are denominated in consolidated statement of profit or loss. Group’s performance of its obligations relating to the incentive. Amounts due from lessees under finance leases are recorded as foreign currencies are translated at the rates prevailing at the date receivables at the amount of the Group’s net investment in the when the fair value was determined. Non-monetary items that are Revenue In revenue arrangements including more than one deliverable that leases. Finance lease income is allocated to accounting periods so measured in terms of historical cost in a foreign currency are not Revenue is measured at the fair value of the consideration have value to a customer on standalone basis, the arrangement as to reflect a constant periodic rate of return on the Group’s net retranslated. received or receivable and represents amounts receivable for consideration is allocated to each deliverable based on the investment outstanding in respect of the leases. telecommunication products and services provided in the normal relative fair value of the individual elements. The Group generally ii) Consolidation course of business. Revenue is recognised, net of sales taxes, determines the fair value of individual elements based on prices at Revenues from the sale of transmission capacity on terrestrial On consolidation, the assets and liabilities of the Group’s foreign discounts and rebates, when it is probable that the economic which the deliverable is regularly sold on a standalone basis. and submarine cables are recognised on a straight-line basis over operations are translated into UAE Dirhams at exchange rates benefits associated with a transaction will flow to the Group the life of the contract. Rental income from operating leases is prevailing on the date of end of each reporting period. Goodwill and the amount of revenue and associated cost can be measured Contract revenue is recognised under the percentage of recognised on a straight-line basis over the term of the relevant and fair value adjustments arising on the acquisition of a foreign reliably. Revenue from telecommunication services comprises completion method. Profit on contracts is recognised only when lease. Initial direct costs incurred in negotiating and arranging an entity are also translated at exchange rates prevailing at the end amounts charged to customers in respect of monthly access the outcome of the contracts can be reliably estimated. Provision operating lease are added to the carrying amount of the leased of each reporting period. Income and expense items are translated charges, airtime usage, messaging, the provision of other mobile is made for foreseeable losses estimated to complete contracts. asset and recognised on a straight-line basis over the lease term. at the average exchange rates for the period unless exchange telecommunications services, including data services and rates fluctuate significantly during that period, in which case the information provision and fees for connecting users of other fixed Revenue from interconnection of voice and data traffic with ii) The Group as lessee exchange rates at the date of transactions are used. Exchange line and mobile networks to the Group’s network. other telecommunications operators is recognised at the time the Rentals payable under operating leases are charged to the differences are recognised in other comprehensive income and services are performed based on the actual recorded traffic. consolidated statement of profit or loss on a straight-line are presented in the translation reserve in equity. On disposal of Access charges and airtime used by contract customers are basis over the term of the relevant lease. Benefits received and overseas subsidiaries or when significant influence is lost, the invoiced and recorded as part of a periodic billing cycle and Interest income is accrued on a time basis, by reference to the receivable as an incentive to enter into an operating lease are also cumulative translation differences are recognised as income or recognised as revenue over the related access period, with unbilled principal outstanding and at the effective interest rate applicable, spread on a straight-line basis over the lease term. expense in the period in which they are disposed of. revenue resulting from services already provided from the billing which is the rate that exactly discounts estimated future cash cycle date to the end of each period accrued and unearned receipts through the expected life of the financial assets to that Foreign currencies iii) Foreign exchange differences revenue from services provided in periods after each accounting asset’s net carrying amount. i) Functional currencies Exchange differences are recognised in the consolidated statement period deferred. Revenue from the sale of prepaid credit is The individual financial statements of each of the Group’s of profit or loss in the period in which they arise except for recognised on the actual utilisation of the prepaid credit and is subsidiaries, associates and joint ventures are presented in exchange differences that relate to assets under construction deferred as deferred income until such time as the customer uses the currency of the primary economic environment in which for future productive use. These are included in the cost of those the airtime, or the credit expires. they operate (its functional currency). For the purpose of the assets when they are regarded as an adjustment to interest consolidated financial statements, the results, financial position costs on foreign currency borrowings. Exchange differences Revenue from data services and information provision is and cash flows of each company are expressed in UAE Dirhams, on transactions entered into to hedge certain foreign currency recognised when the Group has performed the related service and, which is the functional currency of the Company, and the risks and exchange differences on monetary items receivable depending on the nature of the service, is recognised either at the presentation currency of the consolidated financial statements. from or payable to a foreign operation for which settlement gross amount billed to the customer or the amount receivable by is neither planned nor likely to occur, which form part of the the Group as commission for facilitating the service. net investment in a foreign operation are recognised initially

94 95 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued) iii) Foreign exchange differences (continued)

Taxation a business combination) of other assets and liabilities in a transaction in other comprehensive income and reclassified from equity to Government grants The tax expense represents the sum of the tax currently payable that affects neither taxable profit nor the accounting profit. the consolidated statement of profit or loss on disposal of net Government grants relating to non-monetary assets are and deferred tax. investment. recognised at nominal value. Grants that compensate the Group Deferred tax assets and liabilities are offset when there is a legally for expenses are recognised in the consolidated statement of The tax currently payable is based on taxable profit for the year. enforceable right to set off current tax assets against current tax iv) Foreign exchange gains and losses profit or loss on a systematic basis in the same period in which the Taxable profit differs from profit as reported in the consolidated liabilities and when they relate to income taxes levied by the same The carrying amount of financial assets that are denominated in a expenses are recognised. Grants that compensate the Group for statement of profit or loss because it excludes items of income taxation authority and the Group intends to settle its current tax foreign currency is determined in that foreign the cost of an asset are recognised in the consolidated statement or expense that are taxable or deductible in other periods and it assets and liabilities on a net basis. currency and translated at the spot rate at the end of each of profit or loss on a systematic basis over the expected useful life further excludes items that are never taxable or deductible. The reporting period. Specifically, of the related asset upon capitalisation. Group’s liability for current tax is calculated using tax rates that Deferred tax liabilities are recognised for taxable temporary • for financial assets measured at amortised cost that are have been enacted or substantively enacted at the end of the differences arising on investments in subsidiaries and associates, and not part of a designated hedging relationship, exchange End of service benefits reporting period. interests in joint ventures, except where the Group is able to control differences are recognised in profit or loss; Payments to defined contribution schemes are charged as an the reversal of the temporary difference and it is probable that the • for debt instruments measured at FVTOCI that are not part of expense as they fall due. Payments made to state-managed Deferred tax is the tax expected to be payable or recoverable on temporary difference will not reverse in the foreseeable future. a designated hedging relationship, exchange differences on pension schemes are dealt with as payments to defined differences between the carrying amounts of assets and liabilities the amortised cost of the debt instrument are recognised in contribution schemes where the Group’s obligations under the in the financial statements and the corresponding tax bases used Property, plant and equipment profit or loss. Other exchange differences are recognised in schemes are equivalent to those arising in a defined contribution in the computation of taxable profit, and is accounted for using Property, plant and equipment are only measured at cost, less other comprehensive income in the investments revaluation scheme. the liability method. accumulated depreciation and any impairment. Cost comprises the reserve; cost of equipment and materials, including freight and insurance, • for financial assets measured at FVTPL that are not part of Provision for employees’ end of service benefits for non-UAE Deferred tax is calculated using relevant tax rates and laws that charges from contractors for installation and building works, a designated hedging relationship, exchange differences are nationals is made in accordance with the Projected Unit Cost have been enacted or substantially enacted at the reporting date direct labour costs, capitalised borrowing costs and an estimate recognised in profit or loss; and method as per IAS 19 Employee Benefits taking into consideration and are expected to apply when the related deferred tax asset is of the costs of dismantling and removing the equipment and • for equity instruments measured at FVTOCI, exchange the UAE Labour Laws. The provision is recognised based on the realised or the deferred tax liability is settled. restoring the site on which it is located. differences are recognised in other comprehensive income in present value of the defined benefit obligations. the investments revaluation reserve. Deferred tax is charged or credited in the consolidated statement Assets in the course of construction are carried at cost, less any The present value of the defined benefit obligations is calculated of profit or loss, except when it relates to items charged or impairment. Cost includes professional fees and, for qualifying Borrowing costs using assumptions on the average annual rate of increase in credited directly to equity, in which case the deferred tax is also assets, borrowing costs capitalised in accordance with the Group’s Borrowing costs directly attributable to the acquisition, salaries, average period of employment of non-UAE nationals and dealt with in equity. accounting policy. Depreciation of these assets commences when construction or production of qualifying assets, which are assets an appropriate discount rate. The assumptions used are calculated the assets are ready for their intended use. that necessarily take a substantial period of time to get ready for on a consistent basis for each period and reflect management’s Deferred tax liabilities are generally recognised for all taxable their intended use or sale, are added to the cost of those assets, best estimate. The discount rates are set in line with the best temporary differences and deferred tax assets are recognised to Subsequent costs are included in the asset’s carrying amount or until such time as the assets are substantially ready for their available estimate of market yields currently available at the the extent that it is probable that sufficient taxable profits will recognised as a separate asset, as appropriate, only when it is intended use or sale. reporting date with reference to high quality corporate bonds or be available in the future against which deductible temporary probable that future economic benefits associated with the item other basis, if applicable. differences can be utilised. will flow to the Group and the cost of the item can be measured Investment income earned on the temporary investment of reliably. All other repairs and maintenance costs are charged to specific borrowings pending their expenditure on qualifying assets The carrying amount of deferred tax assets is reviewed at the end of consolidated statement of profit or loss during the period in which is deducted from the borrowing costs eligible for capitalisation. the reporting period and reduced to the extent that it is no longer they are incurred. probable that sufficient taxable profits will be available to allow all All other borrowing costs are recognised in the consolidated or part of the asset to be recovered. Such assets and liabilities are Other than land (which is not depreciated), the cost of property, statement of profit or loss in the period in which they are incurred. not recognised if the temporary difference arises from the initial plant and equipment is depreciated on a straight line basis over recognition of goodwill or from the initial recognition (other than in the estimated useful lives of the assets as follows:

96 97 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued) Property, plant and equipment (continued)

of acquisition. Goodwill is initially recognised as an asset at Internally-generated intangible assets are amortised on a Buildings Years cost and is subsequently measured at cost less any accumulated straight-line basis over their useful lives of 3-10 years. Where Permanent – the lesser of 20 – 50 years and the period of the land lease. impairment losses. no internally-generated intangible asset can be recognised, Temporary – the lesser of 4 – 10 years and the period of the land lease. development expenditure is recognised as an expense in the period Civil works 10 – 25 For the purpose of impairment testing, goodwill is allocated to in which it is incurred. each of the Group’s cash-generating units (CGUs) expected to

Plant and equipment Years benefit from the synergies of the combination. CGUs to which (iv) Indefeasible Rights of Use (“IRU”) goodwill has been allocated are tested for impairment annually, or IRUs correspond to the right to use a portion of the capacity of Submarine – fibre optic cables 15 – 20 more frequently when there is an indication that the unit may be a terrestrial or submarine transmission cable granted for a fixed – coaxial cables 10 – 15 impaired. If the recoverable amount of the cash-generating unit period. IRUs are recognised at cost as an asset when the Group has Cable ships 15 – 25 is less than the carrying amount of the unit, the impairment loss the specific indefeasible right to use an identified portion of the Coaxial and fibre optic cables 15 – 25 is allocated first to reduce the carrying amount of any goodwill underlying asset, generally optical fibres or dedicated wavelength Line plant 10 – 25 allocated to the unit and then to the other non-financial assets bandwidth, and the duration of the right is for the major part of the of the unit pro-rata on the basis of the carrying amount of each underlying asset’s economic life. They are amortised on a straight Exchanges 5 – 15 asset in the unit. An impairment loss recognised for goodwill is line basis over the shorter of the expected period of use and the life Switches 8 – 15 not reversed in a subsequent period. of the contract which ranges between 10 to 20 years. Radios/towers 10 – 25 Earth stations/VSAT 5 – 15 On disposal of an associate, joint venture, or a subsidiary or (v) Other intangible assets Multiplex equipment 10 – 15 where Group ceases to exercise control, the attributable amount Customer relationships and trade names are recognised on of goodwill is included in the determination of the profit or loss acquisition at fair values. They are amortised on a straight line Power plant 5 – 10 on disposal. basis over their estimated useful lives. The useful lives of customer Subscribers’ apparatus 3 – 15 relationships range from 3-23 years and trade names have a General plant 2 – 25 (ii) Licenses useful life of 15-25 years. The useful lives of other intangible Acquired telecommunication licenses are initially recorded at assets range from 3-10 years. Other assets: cost or, if part of a business combination, at fair value. Licenses are amortised on a straight line basis over their estimated useful Impairment of tangible and intangible assets excluding goodwill Motor vehicles 3 – 5 lives from when the related networks are available for use. The The Group reviews the carrying amounts of its tangible and Computers 3 – 5 estimated useful lives range between 10 and 25 years and are intangible assets whenever there is any indication that those Furniture, fittings and office equipment 4 – 10 determined primarily by reference to the unexpired license period, assets have suffered an impairment loss. If any such indication the conditions for license renewal and whether licenses are exists, the recoverable amount of the asset is estimated in order The assets’ residual values and useful lives are reviewed and Investment property dependent on specific technologies. to determine the extent of any impairment loss. Where the asset adjusted, if appropriate, at the end of the reporting period. Investment property, which is property held to earn rentals and/ does not generate cash flows that are independent from other or for capital appreciation, is carried at cost less accumulated (iii) Internally-generated intangible assets assets, the Group estimates the recoverable amount of the cash- In the prior year, some of the Group’s subsidiaries amended the depreciation and impairment loss. Investment properties are An internally-generated intangible asset arising from the Group’s generating unit to which the asset belongs. An intangible asset useful life of their tangible assets. The impact of these changes depreciated on a straight-line basis over 30 years. IT development is recognised at cost only if all of the following with an indefinite useful life (including goodwill) is tested for was not material to these consolidated financial statements. conditions are met: impairment annually. Intangible assets • an asset is created that can be identified (such as software The gain or loss arising on the disposal or retirement of an asset is (i) Goodwill and new processes); Recoverable amount is the higher of an asset’s fair value less costs determined as the difference between the sales proceeds and the Goodwill arising on consolidation represents the excess of the • it is probable that the asset created will generate future to sell and value in use. In assessing value in use, the estimated carrying amount of the asset and is recognised in the consolidated cost of an acquisition over the fair value of the Group’s share economic benefits; and future cash flows are discounted to their present value using a statement of profit or loss. of net identifiable assets of the acquired subsidiary at the date • the development cost of the asset can be measured reliably. pre-tax discount rate that reflects current market assessments

98 99 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued) Impairment of tangible and intangible assets excluding goodwill (continued) of the time value of money and the risks specific to the asset for The amortised cost of a financial asset is the amount at which the consolidated statement of profit or loss if these instruments which the estimates of future cash flows have not been adjusted. i) Fair value the financial asset is measured at initial recognition minus the had been measured at amortised cost. All other changes in the Fair value is the price that would be received to sell an asset principal repayments, plus the cumulative amortisation using the carrying amount of these instruments are recognised in other If the recoverable amount of an asset (or cash-generating unit) or paid to transfer a liability in an orderly transaction between effective interest method of any difference between that initial comprehensive income and accumulated under the heading of is estimated to be less than its carrying amount, the carrying market participants at the measurement date, regardless of amount and the maturity amount, adjusted for any loss allowance. investments revaluation reserve. When these instruments are amount of the asset (or cash-generating unit) is reduced to its whether that price is directly observable or estimated using On the other hand, the gross carrying amount of a financial asset derecognised, the cumulative gains or losses previously recognised recoverable amount. An impairment loss is recognised as an another valuation technique. In estimating the fair value is the amortised cost of a financial asset before adjusting for any in other comprehensive income are reclassified to the consolidated expense immediately, unless the relevant asset is carried at a of an asset or a liability, the Group takes into account the loss allowance. statement of profit or loss. revalued amount, in which case the impairment loss is treated as a characteristics of the asset or liability if market participants would revaluation decrease. take those characteristics into account when pricing the asset or Debt instruments that meet the following conditions are v) Fair value through OCI – without recycling liability at the measurement date. subsequently measured at amortised cost: On initial recognition, the Group may make an irrevocable election Non-financial assets other than goodwill that suffered impairment • the financial asset is held within a business model whose (on an instrument-by-instrument basis) to designate investments are reviewed for possible reversal of the impairment at each ii) Financial assets objective is to hold financial assets in order to collect in equity instruments as at FVTOCI. Designation at FVTOCI is not reporting date. Where an impairment loss subsequently reverses, Financial assets are classified into the following specified contractual cash flows; and permitted if the equity investment is held for trading or if it is the carrying amount of the asset (or cash-generating unit) is categories: ‘amortised cost’, ‘fair value through OCI with • the contractual terms of the financial asset give rise on contingent consideration recognised by an acquirer in a business increased to the revised estimate of its recoverable amount, but so recycling’, ‘fair value through OCI without recycling’, ‘fair value specified dates to cash flows that are solely payments of combination to which IFRS 3 applies. that the increased carrying amount does not exceed the carrying through profit or loss’. The classification depends on the business principal and interest on the principal amount outstanding. amount that would have been determined had no impairment loss model for managing the financial asset and the contractual cash A financial asset is held for trading if it is: been recognised for the asset (or cash-generating unit) in prior flow characteristics of financial asset and is determined at the Interest income is recognised using the effective interest method • acquired or incurred principally for the purpose of selling or years. A reversal of an impairment loss is recognised as income time of initial recognition. for debt instruments measured subsequently at amortised cost and repurchasing it in the near term; immediately, unless the relevant asset is carried at a revalued at FVTOCI. Interest income is calculated by applying the effective • part of a portfolio of identified financial instruments that amount, in which case the reversal of the impairment loss is All financial assets are recognised and derecognised on trade date interest rate to the gross carrying amount of a financial asset, except are managed together and for which there is evidence of a treated as a revaluation increase. where the purchase or sale of a financial asset is under a contract for financial assets that have subsequently become credit-impaired. recent actual pattern of short-term profit taking; or whose terms require delivery of the investment within the For financial assets that have subsequently become credit-impaired, • a derivative (except for a derivative that is a designated and Inventory timeframe established by the market concerned, and are initially interest income is recognised by applying the effective interest rate to effective hedging instrument) Inventory is measured at the lower of cost and net realisable measured at fair value, plus transaction costs, except for those the amortised cost of the financial asset. If, in subsequent reporting value. Cost comprises direct materials and where applicable, financial assets classified as at fair value through profit or loss, periods, the credit risk on the credit-impaired financial instrument Investments in equity instruments at FVTOCI are initially directs labour costs and those overheads that have been incurred which are initially measured at fair value. improves so that the financial asset is no longer credit-impaired, measured at fair value plus transaction costs. Subsequently, they in bringing the inventories to their present location and condition. interest income is recognised by applying the effective interest rate to are measured at fair value with gains and losses arising from Allowance is made, where appropriate, for deterioration and iii) Amortised cost and effective interest method the gross carrying amount of the financial asset. changes in fair value recognised in other comprehensive income obsolescence. Cost is determined in accordance with the weighted The effective interest method is a method of calculating the and accumulated in the investments revaluation reserve. The average cost method. Net realisable value represents the amortised cost of a debt instrument and of allocating interest iv) Fair value through OCI – with recycling cumulative gain or loss will not be reclassified to the consolidated estimated selling price less all estimated costs of completion and income over the relevant period. The effective interest rate is These instruments are initially measured at fair value plus statement of profit or loss on disposal of the equity investments, costs to be incurred in marketing, selling and distribution. the rate that exactly discounts estimated future cash receipts transaction costs. Subsequently, changes in the carrying amount instead, it will be transferred to retained earnings . (including all fees and points paid or received that form an of these instruments as a result of foreign exchange gains Financial instruments integral part of the effective interest rate, transaction costs and and losses, impairment gains or losses, and interest income Dividends on these investments in equity instruments are Financial assets and financial liabilities are recognised in the other premiums or discounts) excluding expected credit losses, calculated using the effective interest method are recognised in recognised in the consolidated statement of profit or loss when consolidated statement of financial position when the Group through the expected life of the debt instrument, or, where the consolidated statement of profit or loss. The amounts that the Group’s right to receive the dividends is established in becomes a party to the contractual provisions of the instrument. appropriate, a shorter period, to the gross carrying amount of the are recognised in the consolidated statement of profit or loss are accordance with IAS 18 Revenue, unless the dividends clearly debt instrument on initial recognition. the same as the amounts that would have been recognised in represent a recovery of part of the cost of the investment.

100 101 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued)

The Group regularly monitors the effectiveness of the criteria used granted to the borrower a concession(s) that the lender(s) vi) Fair value through profit and loss For all other financial instruments, the Group recognises lifetime to identify whether there has been a significant increase in credit would not otherwise consider; Financial assets that do not meet the criteria for being ECL when there has been a significant increase in credit risk risk and revises them as appropriate to ensure that the criteria are • it is becoming probable that the borrower will enter measured at amortised cost or FVTOCI (see 2 (iii to iv)) are since initial recognition. If, on the other hand, the credit risk on capable of identifying significant increase in credit risk before the bankruptcy or other financial reorganisation; or measured at FVTPL. the financial instrument has not increased significantly since amount becomes past due. • the disappearance of an active market for that financial asset initial recognition, the Group measures the loss allowance for because of financial difficulties. Financial assets at FVTPL are measured at fair value at the end of that financial instrument at an amount equal to 12 months ECL. b) Definition of default each reporting period, with any fair value gains The assessment of whether lifetime ECL should be recognised is The Group considers the default in case of trade receivables, the d) Measurement and recognition of expected credit losses or losses recognised in the consolidated statement of profit or based on significant increases in the likelihood or risk of a default Group considers that default occurs when a customer balance The measurement of expected credit losses is a function of the loss to the extent they are not part of a designated hedging occurring since initial recognition instead of on evidence of a moves into the “Ceased” category based on its debt age analysis probability of default, loss given default (i.e. the magnitude of the loss relationship. The net gain or loss recognised in the consolidated financial asset being credit-impaired at the end of the reporting for internal credit risk management purposes. if there is a default) and the exposure at default. The assessment of statement of profit or loss includes any dividend or interest earned period or an actual default occurring. the probability of default and loss given default is based on historical on the financial asset Fair value is determined in the manner For all other financial assets, the Group considers the following data adjusted by forward-looking information as described above. As described in note 2 (i). a) Significant increase in credit risk as constituting an event of default for internal credit risk for the exposure at default for financial assets, this is represented by In assessing whether the credit risk on a financial instrument management purposes as historical experience indicates that the assets’ gross carrying amount at the reporting date. vii) Cash and cash equivalents has increased significantly since initial recognition, the Group receivables that meet either of the following criteria are generally Cash and cash equivalents comprise cash on hand and demand compares the risk of a default occurring on the financial not recoverable. Where lifetime ECL is measured on a collective basis to cater for deposits and other short-term highly liquid investments that are instrument as at the end of the reporting period with the risk of cases where evidence of significant increases in credit risk at the readily convertible to a known amount of cash and are subject to a default occurring on the financial instrument as at the date of • when there is a breach of financial covenants by the individual instrument level may not yet be available, the financial an insignificant risk of changes in value. initial recognition. In making this assessment, the Group considers counterparty; or instruments are grouped on the following basis: both quantitative and qualitative information that is reasonable • information developed internally or obtained from external viii) Impairment of financial assets and supportable, including historical experience and forward- sources indicates that the debtor is unlikely to pay its • Nature of financial instruments (i.e. the Group’s trade and The Group recognises a loss allowance for expected credit losses looking information that is available without undue cost or effort. creditors, including the Group, in full (without taking into other receivables, finance lease receivables and amounts due on investments in debt instruments that are Irrespective of the outcome of the above assessment, the Group account any collaterals held by the Group). from customers are each assessed as a separate group. Loans presumes that the credit risk on a financial asset has increased to related parties are assessed for expected credit losses on an measured at amortised cost or at FVTOCI, lease receivables, significantly since initial recognition when contractual payments Irrespective of the above analysis, the Group considers that default individual basis); trade receivables, as well as on loan commitments and financial are more than 30 days past due, unless the Group has reasonable has occurred when a financial asset is more than 90 days past due, • Past-due status; guarantee contracts. No impairment loss is recognised for and supportable information that demonstrates otherwise. unless the Group has reasonable and supportable information to • Nature, size and industry of debtors; and investments in equity instruments. The amount of expected credit demonstrate that a more lagging default criterion is more appropriate. • External credit ratings where available. losses is updated at the end of each reporting period to reflect Despite the foregoing, the Group assumes that the credit risk on changes in credit risk since initial recognition of the respective a financial instrument has not increased significantly since initial c) Credit – impaired financial assets The grouping is regularly reviewed by management to ensure the financial instrument. recognition if the financial instrument is determined to have low A financial asset is credit-impaired when one or more events constituents of each group continue to share similar credit risk credit risk at the reporting date. A financial instrument is determined that have a detrimental impact on the estimated future cash characteristics. The Group always recognises lifetime ECL for trade receivables, to have low credit risk if i) the financial instrument has a low risk of flows of that financial asset have occurred. Evidence that a using the simplified approach. The expected credit losses on these default, ii) the borrower has a strong capacity to meet its contractual financial asset is credit-impaired includes observable data about The Group recognizes an impairment gain or loss in the financial assets are estimated using a provision matrix based on cash flow obligations in the near term and iii) adverse changes in the following events: consolidated statement of profit or loss for all financial the Group’s historical credit loss experience, adjusted for factors economic and business conditions in the longer term may, but will not instruments with a corresponding adjustment to their carrying that are specific to the debtors, general economic conditions and necessarily, reduce the ability of the borrower to fulfil its contractual • significant financial difficulty of the issuer or the borrower; amount through a loss allowance account, except for investments an assessment of both the current as well as the forecast direction cash flow obligations. The Group considers a financial asset to have • a breach of contract, such as a default or past due event; in debt instruments that are measured at FVTOCI, for which the of conditions at the reporting date, including time value of money low credit risk when it has an internal or external credit rating of • the lender(s) of the borrower, for economic or contractual loss allowance is recognised in other comprehensive income and where appropriate. ‘investment grade’ as per globally understood definition. reasons relating to the borrower’s financial difficulty, having accumulated in the investment revaluation reserve, and does

102 103 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

2. Significant accounting policiies (continued) 2. Significant accounting policiies (continued) not reduce the carrying amount of the financial asset in the xiv) Hedge accounting xv) Derecognition of financial assets When the Group loses control of a subsidiary, a gain or loss is consolidated statement of financial position. The Group may designate certain hedging instruments, which include The Group derecognises a financial asset only when the recognised in profit or loss and is calculated as the difference derivatives, embedded derivatives and non-derivatives in respect of contractual rights to the cash flows from the asset expire; or between (i) the aggregate of the fair value of the consideration ix) Financial liabilities foreign exchange risk, as either fair value hedges, cash flow hedges, it transfers the financial asset or substantially all the risk and received and the fair value of any retained interest and (ii) the Financial liabilities are classified as either financial liabilities ‘at fair or hedges of net investments in foreign operations. Hedges of foreign rewards of ownership to another entity. If the Group neither previous carrying amount of the assets (including goodwill), and value through profit or loss’ (“FVTPL”) or other financial liabilities. exchange risk on firm commitments are accounted for as cash flow transfer nor retains substantially all the risks and reward of liabilities of the subsidiary and any non-controlling interests. All hedges where appropriate criteria are met. ownership and continues to control the transferred asset, amounts previously recognised in other comprehensive income x) Financial liabilities at FVTPL the Group recognises its retained interest in the asset and in relation to that subsidiary are accounted for as if the Group Financial liabilities are classified as at FVTPL where the financial At the inception of the hedge relationship, the entity documents associated liability for amounts it may have to pay. If the Group had directly disposed of the related assets or liabilities of the liability is either held for trading or it is designated as such. A the relationship between the hedging instrument and the hedged retains substantially all the risks and rewards of ownership of a subsidiary (i.e. reclassified to profit or loss or transferred to financial liability is classified as held for trading if it has been item, along with its risk management objectives and its strategy transferred financial asset, the Group continues to recognise the another category of equity as specified/permitted by applicable incurred principally for the purpose of disposal in the near for undertaking various hedge transactions. Furthermore, at financial asset and also recognises a collateralised borrowing for IFRSs). The fair value of any investment retained in the former future or it is a derivative that is not designated and effective the inception of the hedge and on an ongoing basis, the Group the proceeds received. subsidiary at the date when control is lost is regarded as the fair as a hedging instrument. Financial liabilities at FVTPL are stated documents whether the hedging instrument is highly effective value on initial recognition for subsequent accounting under at fair value, with any resultant gain or loss recognised in the in offsetting changes in fair values or cash flows of the hedged Provisions IFRS 9, when applicable, the cost on initial recognition of an consolidated statement of profit or loss. item attributable to the hedged risk, which is when the hedging Provisions are recognised when the Group has a present obligation investment in an associate or a joint venture. relationships meet all of the following hedge effectiveness as a result of a past event, and it is probable that the Group will xi) Other financial liabilities requirements. be required to settle that obligation. Provisions are measured at Dividends Other financial liabilities (including borrowings and trade and the directors’ best estimate of the expenditure required to settle Dividend distributions to the Group’s shareholders are recognised other payables) are subsequently measured at amortised cost • there is an economic relationship between the hedged item the obligation at the reporting date, and are discounted to present as a liability in the consolidated financial statements in the period using the effective interest method, with interest expense and the hedging instrument; value where the effect is material. in which the dividends are approved. recognised on an effective yield basis. • the effect of credit risk does not dominate the value changes that result from that economic relationship; and Transactions with non-controlling interests Disposal of Assets / Assets Held for Sale The effective interest method is a method of calculating the • the hedge ratio of the hedging relationship is the same as The Group applies a policy of treating transactions with non- • Assets may be disposed of individually or as part of a disposal amortised cost of a financial liability and of allocating interest that resulting from the quantity of the hedged item that controlling interest holders as transactions with parties external group. Once the decision is made to dispose of an asset, expense over the relevant period. The effective interest rate is the Group actually hedges and the quantity of the hedging to the Group. Disposals to non-controlling interest holders it is classified as “Held for Sale” and shall no longer be the rate that exactly discounts estimated future cash payments instrument that the entity actually uses to hedge that result in gains and losses for the Group and are recorded in the depreciated. Assets that are classified as “Held for Sale” must through the expected life of the financial liability, or, where quantity of hedged item. consolidated statement of profit or loss. Purchases from non- be disclosed in the financial statements. • An asset is appropriate, a shorter period. controlling interest holders result in goodwill, being the difference considered to be Held for Sale if its carrying amount will be If a hedging relationship ceases to meet the hedge effectiveness between any considerations paid and the relevant share acquired recovered principally through a sale transaction, not through xii) Derecognition of financial liabilities requirement relating to the hedge ratio but the risk management of the carrying value of net assets of the subsidiary. continuing use. The criteria for classifying an asset as Held The Group derecognises financial liabilities when, and only when, objective for that designated hedging relationship remains for Sale are as follows: the Group’s obligations are discharged, cancelled or they expire. the same, the Group adjusts the hedge ratio of the hedging Changes in the Group’s ownership interests in subsidiaries that - It must be available for immediate sale in its relationship (i.e. rebalances the hedge) so that it meets the do not result in the Group losing control over the subsidiaries are present condition, xiii) Embedded derivatives qualifying criteria again. accounted for as equity transactions. The carrying amounts of the - Its sale must be highly probable, and Derivatives embedded in other financial instruments or other host Group’s interests and the non-controlling interests are adjusted to - It must be sold, not abandoned. contracts are treated as separate derivatives when their risks and reflect the changes in their relative interests in the subsidiaries. characteristics are not closely related to those of host contracts Any difference between the amount by which the non-controlling and the host contracts are not measured at fair value with interests are adjusted and the fair value of the consideration changes in fair value recognised in the consolidated statement of paid or received is recognised directly in equity and attributed to profit or loss. owners of the Company.

104 105 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

3. Critical accounting judgements and key sources of estimation uncertainty (continued)

3. Critical accounting judgements and key ii) Classification of interests in other entities Key sources of estimation uncertainty consolidated statement of profit or loss. sources of estimation uncertainty The appropriate classification of certain interests in other entities i) Impairment of goodwill and investment in associates requires significant analysis and management judgement as to Determining whether goodwill is impaired requires an estimation of iv) Measurement of the expected credit loss allowance In the application of the Group’s accounting policies, which are whether the Group exercises control, significant influence or the value-in-use of the cash-generating unit to which the goodwill The measurement of the expected credit loss allowance for described in Note 2, the directors are required to make judgements, joint control over these interests. This may involve consideration has been allocated. The value-in-use calculation for goodwill and financial assets measured at amortised cost and FVTOCI is an estimates and assumptions about the carrying amounts of assets of a number of factors, including ownership and voting rights, associates requires the Group to calculate the net present value of area that requires the use of complex models and significant and liabilities that are not readily apparent from other sources. the extent of Board representation, contractual arrangements the future cash flows for which certain assumptions are required, assumptions about future economic conditions and credit behavior The estimates and associated assumptions are based on historical and indicators of defacto control. Changes to these indicators including management’s expectations of: (e.g. the likelihood of customers defaulting and the resulting experience and other factors that are considered to be relevant. and management’s assessment of the power to control or • long term growth rates in cash flows; losses). Explanation of the inputs, assumptions and estimation Actual results may differ from these estimates. influence may have a material impact on the classification • timing and quantum of future capital expenditure; and techniques used in measuring ECL is further detailed in note 2. of such investments and the Group’s consolidated financial • the selection of discount rates to reflect the risks involved. The estimates and underlying assumptions are reviewed on an position, revenue and results. Specific judgements regarding Elements of the ECL models that are considered accounting ongoing basis. Revisions to accounting estimates are recognised in the classification of the Group’s interests in Maroc Telecom and The key assumptions used and sensitivities are detailed on Note judgments and estimates include: the period in which the estimate is revised if the revision affects Pakistan Telecommunications Company Limited are disclosed in 9 of the consolidated financial statements. A change in the only that period or in the period of the revision and future periods Note 12. key assumptions or forecasts might result in an impairment of • Development of ECL models, including the various formulas if the revision affects both current and future periods. goodwill and investment in associates. and choice of inputs iii) Federal royalty • Determining the criteria if there has been a significant The key assumptions concerning the future, and other key sources The computation of Federal Royalty in accordance with the ii) Impairment of intangibles increase in credit risk and so allowances for financial of estimation uncertainty at the reporting date, that have a Cabinet of Ministers of UAE decision No.320/15/23 of 2012 Impairment testing is an area involving management judgement, assets should be measured on a lifetime ECL basis and the significant risk of causing a material adjustment to the carrying and guidelines issued by the UAE Ministry of Finance (“the requiring assessment as to whether the carrying value of assets qualitative assessment; amounts of assets and liabilities within the next financial year, are MoF”) dated 21 January 2013 and subsequent clarification can be supported by the net present value of future cash flows • The segmentation of financial assets when their ECL is disclosed below. letters dated 24 April 2013, 30 October 2013 and 29 January derived from such assets using cash flow projections which assessed on a collective basis; and 2014 required a number of calculations. In performing these have been discounted at an appropriate rate. In calculating the • Determination of associations between macroeconomic Critical accounting judgements calculations, management had made certain critical judgments, net present value of the future cash flows, certain assumptions scenarios and, economic inputs, and their effect on i) Fair value of other intangible assets interpretations and assumptions. These mainly related to the are required to be made in respect of highly uncertain matters probability of default (PDs), exposure at default (EADs) and On the acquisition of mobile network operators, the identifiable segregation of items between regulated and other activities including management’s expectations of: loss given default (LGDs) intangible assets may include licenses, customer bases and and items which the Company judged as not subject to Federal • long term growth rates in cash flows; brands. The fair value of these assets is determined by discounting royalty or which may be set off against profits which are subject • timing and quantum of future capital expenditure; and Selection of forward-looking macroeconomic scenarios and their estimated future net cash flows generated by the asset, where to Federal royalty. • the selection of discount rates to reflect the risks involved. probability weightings, to derive the economic inputs into the no active market for the assets exists. The use of different ECL models. It has been the Group’s policy to regularly review its assumptions for the expectations of future cash flows and the In 2016, the Company finalised discussions with MOF and agreed iii) Property, plant and equipment models in the context of actual loss experience and adjust when discount rate would change the valuation of the intangible on the basis of allocation of indirect costs between regulated Property, plant and equipment represent a significant proportion necessary. Detailed information about the judgements and assets.The relative size of the Group’s intangible assets, excluding and non-regulated services and the resulting federal royalty of the total assets of the Group. Therefore, the estimates and estimates made by the Group in the above areas is set out in goodwill, makes the judgements surrounding the estimated useful amount for the year ended 31 December 2015 and 2016 was assumptions made to determine their carrying value and related note 2. lives critical to the Group’s financial position and performance. paid, however the finalisation of royalty for 2016 is still in depreciation are critical to the Group’s financial position and progress with MOF. The mechanism for computation of federal performance. The charge in respect of periodic depreciation is The useful lives used to amortise intangible assets relate to the royalty for the year ended 31 December 2017 was in accordance derived after determining an estimate of an asset’s expected future performance of the assets acquired and management’s with the Guidelines. useful life and the expected residual value at the end of its life. judgement of the period over which economic benefit will be Increasing/decreasing an asset’s expected life or its residual value derived from the asset. would result in a reduced/increased depreciation charge in the

106 107 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

4. Segmental information (continued)

4. Segmental information International UAE Morocco Egypt Pakistan Others Eliminations Consolidated b) Segment revenues and results AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Information regarding the Group’s operating segments is set Segment results represent operating profit earned by each 31 December 2017 Revenue out below in accordance with IFRS 8 Operating Segments. IFRS segment without allocation of finance income, finance costs and External sales 31,821,040 7,494,358 2,433,925 4,067,547 5,849,561 - 51,666,431 8 requires operating segments to be identified on the basis of federal royalty. This is the measure reported to the Group’s Board Inter-segment sales 305,653 42,050 51,577 16,952 120,205 )536,437( - internal reports that are regularly reviewed by the Group’s chief of Directors (“Board of Directors”) for the purposes of resource Total revenue 32,126,693 7,536,408 2,485,502 4,084,499 5,969,766 )536,437( 51,666,431 operating decision maker and used to allocate resources to the allocation and assessment of segment performance. Segment result 13,650,617 2,184,010 567,882 )55,674( 1,105,632 - 17,452,467 segments and to assess their performance. Federal royalty (6,038,912) Finance and other income 1,174,466 c) Segment assets Finance and other costs (1,380,569) a) Products and services from which reportable segments derive For the purposes of monitoring segment performance and Profit before tax 11,207,452 their revenues allocating resources between segments, the Board of Directors Total assets 63,542,002 33,506,130 8,455,730 18,752,818 18,758,540 )14,731,115( 128,284,105 The Group is engaged in a single line of business, being the supply monitors the total and non-current assets attributable to each Non-current assets * 26,075,752 30,387,181 6,434,997 15,790,439 14,666,698 )12,813,420( 80,541,647 Depreciation and amortisation 2,158,558 1,893,201 451,278 1,308,886 1,340,165 - 7,152,088 of telecommunications services and related products. The majority segment. Goodwill is allocated based on separately identifiable Impairment and other losses 474,412 - 494 84,171 206,128 - 765,205 of the Group’s revenues, profits and assets relate to its operations CGUs as further disclosed in Note 9. Assets used jointly by in the UAE. Outside of the UAE, the Group operates through its reportable segments are allocated on the basis of the revenues 31 December 2016 subsidiaries and associates in sixteen countries which are divided earned by individual reportable segments. Revenue External sales 31,076,789 7,652,270 3,992,859 4,060,663 5,577,456 - 52,360,037 in to the following operating segments: Inter-segment sales 343,992 71,902 40,522 51,173 187,729 )695,318( - Total revenue 31,420,781 7,724,172 4,033,381 4,111,836 5,765,185 )695,318( 52,360,037 • Pakistan Segment result 13,850,636 1,963,963 223,805 85,350 902,898 - 17,026,652 • Egypt Federal royalty (5,010,127) Finance and other income 1,020,105 • Morocco Finance and other costs (1,912,144) • International - others Profit before tax 11,124,486 Total assets 60,029,343 31,226,594 6,814,677 20,100,018 18,286,911 )13,936,879( 122,520,664 Revenue is attributed to an operating segment based on the Non-current assets * 24,679,138 28,160,103 5,781,992 16,955,576 13,633,360 )12,474,691( 76,735,478 2,130,795 2,156,917 750,264 1,244,699 1,260,586 7,543,261 location of the Company reporting the revenue. Inter-segment Depreciation and amortisation - Impairment and other losses 1,025,948 - 258 45,352 5,573 - 1,077,131 sales are charged at arms’ length prices. * Non-current assets exclude derivative financial assets and deferred tax assets.

The Group’s share of results from associates and joint ventures Breakdown of external revenue has been allocated to the segments based on the geographical The following is an analysis of the Group’s external revenue: International location of the operations of the associate and joint venture UAE Morocco Egypt Pakistan Others Consolidated investments. The allocation is in line with how results from AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 investments in associates and joint ventures are reported to the 31 December 2017 Board of Directors. Revenue from rendering of services 29,393,264 7,421,061 2,352,233 3,955,794 5,828,764 48,951,116 Revenue from sale of telecom and 1,759,120 73,297 80,845 15,983 - 1,929,245 other equipment Other revenues 668,656 - 847 95,770 20,797 786,070 31,821,040 7,494,358 2,433,925 4,067,547 5,849,561 51,666,431 31 December 2016 Revenue from rendering of services 28,971,495 7,536,542 3,874,555 4,003,032 5,533,708 49,919,332 Revenue from sale of telecom and 1,284,167 115,728 116,343 16,237 20,307 1,552,782 other equipment Other revenues 821,127 - 1,961 41,395 23,440 887,923 31,076,789 7,652,270 3,992,859 4,060,664 5,577,455 52,360,037

108 109 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

4. Segmental information (continued) 5. Operating expenses and federal royalty (continued)

2017 2016 UAE Segment revenue breakup: In prior years, in the computation of the regulatory expenses, the In accordance with the Guidelines, the royalty rate for 2016 was AED’000 AED’000 Company had made certain critical judgments and assumptions reduced to 30% of net profit after deduction of the 15% royalty UAE Revenue - TRA regulated 25,013,354 25,781,146 relating mainly to the interpretation of revenues, which the fee on the UAE regulated revenues. The Company also finalised UAE Revenue - Non-regulated 7,113,339 5,639,635 32,126,693 31,420,781 Company contended to include UAE regulated revenues only and discussions with MOF and agreed on the basis of allocation of not revenues in other UAE entities as well as overseas subsidiaries. indirect costs between regulated and non-regulated services 2017 2016 and the resulting federal royalty amount for the year ended 31 Impairment details AED’000 AED’000 b) Federal Royalty December 2016 was paid, however the finalisation of royalty fees of which relating to goodwill 206,122 - In accordance with the Cabinet decision No. 558/1 for the for 2016 is still in progress with MOF. of which relating to intangible assets and property, plant and equipment 374,884 147,943 year 1991, the Company was required to pay a federal royalty, of which other losses 499 - equivalent to 40% of its annual net profit before such federal On 20 February 2017, the UAE Ministry of Finance announced of which relating to available-for-sale financial assets (quoted equity instruments) (Note 30) - 194,759 of which relating to loans to related party 183,700 734,429 royalty, to the UAE Government for use of federal facilities. With the federal royalty scheme to be applied on the Group for the 765,205 1,077,131 effect from 1 June 1998, Cabinet decision No. 325/28M for 1998 period 2017 to 2021 (“new royalty scheme”). According to the new increased the federal royalty payable to 50%. royalty scheme, the Group will pay 15 % royalty fees on the UAE 5. Operating expenses and federal royalty regulated revenue and 30% royalty fees on profit generated from a) Operating expenses (before federal royalty) On 9 December 2012, the Cabinet of Ministers of UAE issued regulated services after deduction of the 15% royalty fees on the 2017 2016 decision no. 320/15/23 of 2012 in respect of a new royalty UAE regulated revenue. Royalty fees on profits from international AED’000 AED’000 mechanism applicable to the Company. Under this mechanism operations shall be considered only if similar fees paid in the Direct cost of sales 12,337,235 11,629,331 a distinction was made between revenue earned from services country of origin are less than the fees that could have been Staff costs 5,073,668 5,171,889 Depreciation 5,535,427 5,773,460 regulated by Telecommunications Regulatory Authority (“TRA”) imposed in the UAE. Network and other related costs 2,412,867 2,580,747 and non-regulated services as well as between foreign and local Amortisation 1,616,661 1,769,801 profits. The Company was required to pay 15% royalty fee on the The mechanism for the computation of federal royalty payable Marketing expenses 961,060 943,144 UAE regulated revenues and 35% of net profit after deduction of for the year ended 31 December 2017 was in accordance with the Regulatory expenses 1,232,750 1,604,105 Operating lease rentals 356,146 442,334 the 15% royalty fee on the UAE regulated revenues. In respect of new royalty scheme. Foreign exchange losses 99,191 694,196 foreign profit, the 35% royalty was reduced by the amount that Hedge ineffectiveness on net investment hedges 301,021 )159,652( the foreign profit has already been subject to foreign taxes. The federal royalty has been treated as an operating expense in )i( 1,122,131 939,515 Loss on allowances the consolidated statement of profit or loss on the basis that Other operating expenses 2,193,322 2,766,034 Operating expenses (before federal royalty) 33,241,479 34,154,904 On 25 February 2015, the UAE Ministry of Finance (‘’MOF’’) issued the expenses the Company would otherwise have had to incur revised guidelines (which was received by the Company on 1 March for the use of the federal facilities would have been classified as

2017 2016 2015) for the computation of federal royalty for the financial years operating expenses. i) Loss on allowances AED’000 AED’000 ending 31 December 2014, 2015 and 2016 (“Guidelines”). Allowances on trade receivables 1,035,386 932,633 Allowances on due from other telecommunication operators/carriers 53,177 6,882 6. Finance and other income Allowances on finance lease receivables 33,568 - Total loss on allowances 1,122,131 939,515 2017 2016 AED’000 AED’000 Operating expenses include an amount of AED 51.83 million Authority (TRA) at 1% of its revenues annually. Interest on bank deposits and held-to-maturity investments - 627,517 Interest on bank deposits and amortised cost investments 674,184 - (2016: AED 37.86 million), relating to social contributions made Gain on forward foreign exchange contracts 8,157 - during the year. During the year, the Company received a letter from UAE Ministry Net gain on financial assets designated as FVTPL 146,971 - of Finance clarifying that the ICT contribution shall be paid and Other income 345,154 392,588 Regulatory expenses: calculated as 1% of the gross regulated revenues arising from 1,174,466 1,020,105 Regulatory expenses include ICT contributions required to be UAE only and does not include any revenues generated outside paid by the Company to the UAE Telecommunication Regulatory the UAE and non regulated revenues in the UAE.

110 111 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

8. Taxation (Continued)

7. Finance and other costs d) Deferred tax

2017 2016 Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax AED’000 AED’000 liabilities and when these relate to the same income tax authority. The amounts recognised in the consolidated statement of financial Interest on bank overdrafts, loans and other financial liabilities 566,244 382,088 position after such offset are as follows: Interest on other borrowings 398,683 524,529 2017 2016 Foreign exchange losses on borrowings 21,715 450,518 AED’000 AED’000 Other costs 300,131 525,676 Deferred tax assets 94,135 128,210 Unwinding of discount 93,796 29,333 Deferred tax liabilities (3,205,407) )3,255,952( 1,380,569 1,912,144 (3,111,272) )3,127,742( Total borrowing costs 1,505,891 1,949,850 Less: amounts included in the cost of qualifying assets (Note 9, 11) (125,322) (37,706) The following represent the major deferred tax liabilities and deferred tax assets recognised by the Group and movements thereon without taking into 1,380,569 1,912,144 consideration the offsetting of balances within the same tax jurisdiction.

All interest charges are generated on the Group’s financial liabilities measured at amortised cost. Borrowing costs included in the cost Accelerated tax Deferred tax on of qualifying assets during the year arose on specific and non - specific borrowing pools. Borrowing costs attributable to non - specific Deferred tax liabilities depreciation overseas earnings Others Total AED’000 AED’000 AED’000 AED’000 borrowing pools are calculated by applying a capitalisation rate of 3.95% to 17.3% (2016: 3.44% to 16.20%) for expenditure on such At 1 January 2016 4,265,303 106,070 57,892 4,429,265 assets. Borrowing costs have been capitalised in relation to loans by certain of the Group’s subsidiaries. Credit to the consolidated statement of profit or loss )292,039( )8,812( )7,065( )307,916( Charge to other comprehensive income - - 409 409 8. Taxation Reclassified from deferred tax liability to deferred tax asset 1,328 - - 1,328 2017 2016 Reclassified as held for sale (Note 36) )67,201( - - )67,201( AED’000 AED’000 Exchange differences )203,850( - )2,272( )206,122( At 31 December 2016 3,703,541 97,258 48,964 3,849,763 Current tax expense 1,548,490 1,683,002 Credit to the consolidated statement of profit or loss )349,766( )8,564( )6,767( )365,097( Deferred tax credit (307,502) )477,489( Credit to other comprehensive income - - )303( )303( 1,240,988 1,205,513 Reclassified from deferred tax liability to deferred tax asset )198( - - )198( Other movements - - )9,597( )9,597( a) Total tax Reclassified as held for sale (Note 36) 13,594 - - 13,594 Corporate income tax is not levied in the UAE for telecommunication companies and accordingly the weighted average tax rate for the Exchange differences 104,831 )700( 27,462 131,593 Group is 30.5% (2016: 31%). The table below reconciles the difference between the expected tax expense, and the Group’s tax charge At 31 December 2017 3,472,002 87,994 59,759 3,619,755 for the year. Retirement 2017 2016 benefit b) The income tax expenses for the year can be reconcilied to the accounting profits as follows: Deferred tax assets AED’000 AED’000 obligations Tax losses Others Total AED’000 AED’000 AED’00 AED’00 Tax based on the weighted average tax rate of 30.5% (2016: 31%) 1,293,228 1,259,887 Tax effect of share of results of associates (10,845) (6,531) At 1 January 2016 98,476 307,951 315,993 722,420 Tax effect of expenses that are not deductible in determining taxable profit 208,268 488,752 Credit/(charge) to the consolidated statement of profit or loss )2,781( 60,906 111,447 169,572 )2,760( - 2,298 )462( Tax effect of utilization of tax losses not previously recognized (14,111) (15) Charge to other comprehensive income Reclassified from deferred tax liability to deferred tax asset - - 1,328 1,328 Effect on deferred tax balances (14,436) (246,252) Reclassified as held for sale (Note 36) )737( )63,116( )4,640( )68,493( Effect on deferred tax balances due to purchase price allocation (219,488) (283,496) Exchange differences )8( 2,777 )105,113( )102,344( Effect of Income that is exempt from taxation (1,627) (6,831) At 31 December 2016 92,190 308,518 321,313 722,021 Income tax expenses recognised in profit or losses 1,240,988 1,205,513 Credit/(charge) to the consolidated statement of profit or loss 282 )18,136( )42,434( )60,288( Credit to other comprehensive income - - 859 859 Reclassified from deferred tax liability to deferred tax asset - - 198 198 c) Current income tax assets and liabilities Tax effect of prior period remeasurment losses reclassified to )87,537( - - )87,537( The current income tax assets represent refunds receivable from tax authorities and current income tax liabilities represent income tax payable. income tax recoverable Deferred tax asset reclassified to income tax recoverable - )130,932( 53,178 )77,754( Other movements - - )10,266( )10,266( Reclassified as held for sale (Note 36) )22( 19,462 )3,120( 16,320 Exchange differences )636( 9,802 )4,237( 4,929 At 31 December 2017 4,277 188,714 315,492 508,483

112 113 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

8. Taxation (Continued) 9. Goodwill, other intangible assets (continued)

2017 2016 2017 2016 Unused tax losses AED million AED million Others - net book values AED’000 AED’000 953 1,443 Total unused tax losses IRU 386,962 414,596 873 1,349 of which deferred tax assets recognised for Computer software 1,227,368 611,277 of which no deferred tax asset recognised, due to unpredictability of future taxable profit streams 80 94 Customer relationships - 139,800 of the unrecognized tax losses, losses that will expire in the next three years - - Others * 636,407 2,603,492 2,250,737 3,769,165 9. Goodwill, other intangible assets An amount of AED 118.7 million (2016: AED 31.8) is included in intangible assets on account of capitalisation of borrowing costs for the year. *In the prior year, included in others was an amount of AED 2,054 million related to advances paid by Etisalat Misr for acquisition of 4G license, for which Other intangible assets the spectrum/frequency was not yet received. During the year AED 1,463 million was capitalised. Virtual fixed line license in Etisalat Misr is still in capital Goodwill Licenses Trade names Others Others work in progress as at 31 December 2017. AED’000 AED’000 AED’000 AED’000 AED’000 Cost 10. Impairment and other losses At 1 January 2016 16,727,362 18,701,000 2,033,606 4,022,691 24,757,297 Additions - 340,985 - 425,294 766,279 Advance against licenses* - - - 2,053,942 2,053,942 a) Impairment and other losses Reclassified as held for sale (Note 36) )206,122( )71,251( - )4,861( )76,112( The impairment losses recognised in the consolidated statement of profit or loss in respect of the carrying amounts of investments, Disposals - - - )4,121( )4,121( goodwill, licenses and property, plant and equipment and other financial assets are as follows: Exchange differences )273,488( )5,383,748( )48,268( )299,846( )5,731,862( 2017 2016 At 31 December 2016 16,247,752 13,586,986 1,985,338 6,193,099 21,765,423 AED’000 AED’000 Pakistan Telecommunication Company Limited (PTCL) 84,171 45,352 Amortisation and impairment of which relating to property, plant and equipment (Note 11) 84,171 45,352 At 1 January 2016 2,149,850 5,709,827 154,554 1,699,845 7,564,226 Etisalat UAE 172,199 96,760 Charge for the year - 780,321 89,219 907,807 1,777,347 of which relating to property, plant and equipment (Note 11) 172,199 96,760 Impairment losses - 5,831 - - 5,831 Etisalat Sri Lanka 206,122 - of which relating to goodwill 206,122 - Elimination on items reclassified as held for sale (Note 36) - )44,942( - )4,754( )49,696( Others 302,713 935,019 Disposals - - - )3,952( )3,952( of which relating to loans to related party 183,700 734,429 Exchange differences - )2,059,461( )3,908( )175,012( )2,238,381( of which relating to available-for-sale financial assets (quoted - 194,759 At 31 December 2016 2,149,850 4,391,576 239,865 2,423,934 7,055,375 equity instruments) (Note 30) Carrying amount of which relating to intangible assets - 5,831 At 31 December 2016 14,097,902 9,195,410 1,745,473 3,769,165 14,710,048 of which relating to property, plant and equipment (Note 11) 118,514 - of which other losses 499 - Cost Total impairment and other losses for the year 765,205 1,077,131 At 1 January 2017 16,247,752 13,586,986 1,985,338 6,193,099 21,765,423 Loss on allowances 1,122,131 939,515 Additions - 108,926 - 566,074 675,000 Transfer - 1,463,119 - )825,109( 638,010 b) Cash generating units Impairment losses were primarily driven by increased discount Other non cash movements - - - )1,210( )1,210( Goodwill acquired in a business combination is allocated, at Reclassified as held for sale (Note 36) - )3,265( - 100 )3,165( rates as a result of increase in inflation in the operating countries acquisition, to the CGUs that are expected to benefit from that Disposals - - - )9,483( )9,483( and challenging economic and political conditions, negative Exchange differences 705,422 1,579,324 140,298 )41,241( 1,678,381 business combination. The Group tests goodwill annually for currency fluctuation as well as operational reasons. In the prior At 31 December 2017 16,953,174 16,735,090 2,125,636 5,882,230 24,742,956 impairment or more frequently if there are indications that year impairment losses of the Group’s investment in available-for- goodwill might be impaired. The carrying amount of goodwill (all Amortisation and impairment sale financial assets was triggered by a significant and prolonged At 1 January 2017 2,149,850 4,391,576 239,865 2,423,934 7,055,375 relating to operations within the Group’s International reportable - 683,345 87,333 862,110 1,632,788 decline in the fair value of the quoted investments. Charge for the year segment) is allocated to the following CGUs: Transfer - - - )82,247( )82,247( Other non cash movements - - - )3,997( )3,997( 2017 2016 - )15,123( - 53 )15,070( Cash generating units (CGU) to which goodwill is allocated: Elimination on items reclassified as held for sale (Note 36) AED’000 AED’000 Disposals - - - )6,470( )6,470( Exchange differences - 267,396 19,616 438,111 725,123 Maroc Telecom 9,101,389 8,179,359 At 31 December 2017 2,149,850 5,327,194 346,815 3,631,493 9,305,502 Maroc Telecom International Subsidiaries 1,782,534 1,782,528 Carrying amount Pakistan Telecommunication Company Limited (PTCL) 3,908,846 4,126,218 At 31 December 2017 14,803,324 11,407,896 1,778,821 2,250,737 15,437,454 Etisalat Misr (Etisalat) S.A.E. 10,555 9,797 14,803,324 14,097,902

114 115 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

10. Impairment and other losses (continued) 11. Property, plant and equipment (continued)

Goodwill has been allocated to the respective segment based on Cost e) Discount rates the separately identifiable CGUs. At 1 January 2017 10,433,619 62,097,822 5,521,552 3,535,255 81,588,248 The discount rates applied to the cash flows of each of the Additions 126,312 2,590,127 150,786 4,497,920 7,365,145 Group’s operations are based on an internal study conducted by Transfer to investment property )871( )118( )16,159( - )17,148( c) Key assumptions for the value in use calculations: the management. The study utilized market data and information Transfers )123,033( 5,503,441 )438,107( )5,580,311( )638,010( The key assumptions for the value in use calculations are those from comparable listed mobile telecommunications companies Disposals )1,770( )1,834,877( )128,277( )4,396( )1,969,320( regarding the long term forecast cash flows, working capital Reclassified as held for sale (Note 36) 17 )2,835( )647( 66,374 62,909 and where available and appropriate, across a specific territory. estimates, discount rates and capital expenditure. Exchange differences 208,787 2,337,109 263,684 5,671 2,815,251 The pre-tax discount rates use a forward looking equity market At 31 December 2017 10,643,061 70,690,669 5,352,832 2,520,513 89,207,075

risk premium and ranges between 9.6% to 21.7% (2016: 6.4% Long term cash flows and working capital estimates to 18%). Depreciation and impairment The Group prepares cash flow forecasts and working capital At 1 January 2017 2,636,898 32,845,038 3,596,418 59,767 39,138,121 estimates derived from the most recent annual business plan Charge for the year 234,712 4,941,838 470,394 - 5,646,944 f) Capital expenditure approved by the Board of Directors for the next five years. The Impairment losses - 259,706 - 122,569 382,275 The cash flow forecasts for capital expenditure are based on past Disposals )2,096( )1,560,814( )99,027( - )1,661,937( business plans take into account local market considerations experience and include the ongoing capital expenditure required Transfers 5,717 558,557 )482,025( - 82,248 such as the revenues and costs associated with future customer Elimination on items reclassified as held for sale (Note 36) - )90,604( )2,416( - )93,020( to continue rolling out networks in emerging markets, providing growth, the impact of local market competition and consideration Exchange differences 173,912 1,476,681 255,530 )14( 1,906,109 voice and data products and services, and meeting the population of the local macro-economic and political trading environment. At 31 December 2017 3,049,143 38,430,402 3,738,874 182,322 45,400,740 coverage requirements of certain licenses of the Group. Capital Carrying amount This rate does not exceed the average long-term growth rate for expenditure includes cash outflows for the purchase of property, At 31 December 2017 7,593,918 32,260,267 1,613,958 2,338,191 43,806,335 the relevant markets and it ranges between 2.7% to 4.2% (2016: plant and equipment and other intangible assets. 1.8% to 5.5%). The carrying amount of the Group’s land and buildings includes value of AED 2,357 million (2016: AED 2,644 million). a nominal amount of AED 1 (2016: AED 1) in relation to land 11. Property, plant and equipment granted to the Group by the Federal Government of the UAE. Assets under construction include buildings, multiplex equipment, There are no contingencies attached to this grant and as such line plant, exchange and network equipment. Motor vehicles, Land and Plant and computer, Assets under no additional amounts have been included in the consolidated buildings equipment furniture construction Total statement of profit or loss or the consolidated statement of 12. Investment property AED’000 AED’000 AED’000 AED’000 AED’000 financial position in relation to this. Cost At 1 January 2016 10,473,209 63,521,982 5,549,418 4,833,980 84,378,589 Investment property, which is property held to earn rentals and/or Additions 88,533 2,366,058 259,087 5,127,129 7,840,807 An amount of AED 6.6 million (2016: AED 5.9 million) is for capital appreciation, is stated at depreciated cost and included Transfer to inventory - - - )128,371( )128,371( included in property, plant and equipment on account of separately under non-current assets in the consolidated statement Transfer from investment property - - - 12,154 12,154 capitalisation of borrowing costs for the year. Borrowings are of financial position. Transfers 290,925 4,131,362 752,627 )5,174,914( - Disposals )152,746( )1,820,796( )80,747( )5,910( )2,060,199( secured against property, plant and equipment with a net book Reclassified as held for sale (Note 36) )844( )1,238,165( )56,255( )87,276( )1,382,540( 2017 2016 Exchange differences )265,458( )4,862,619( )902,578( )1,041,537( )7,072,192( AED’000 AED’000 At 31 December 2016 10,433,619 62,097,822 5,521,552 3,535,255 81,588,248 Cost Depreciation and impairment At 1 January 49,831 60,025 At 1 January 2016 2,617,665 31,709,972 3,721,204 59,767 38,108,608 Additions - 1,960 Charge for the year 204,280 4,965,675 714,770 - 5,884,725 Transfer (to)/from property plant and equipment 17,148 )12,154( Impairment losses - 142,111 - - 142,111 Disposals )114,227( )1,395,659( )77,334( - )1,587,220( At 31 December 66,979 49,831 Elimination on items reclassified as held for sale (Note 36) )183( )780,981( )41,738( - )822,902( Depreciation Exchange differences )70,637( )1,796,080( )720,484( - )2,587,201( At 1 January 22,601 20,668 At 31 December 2016 2,636,898 32,845,038 3,596,418 59,767 39,138,121 Charge for the year 4,253 1,933 Carrying amount At 31 December 2016 7,796,721 29,252,784 1,925,134 3,475,488 42,450,127 At 31 December 26,854 22,601 Carrying amount at 31 December 40,125 27,230 Fair value at 31 December 53,061 50,266

116 117 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

12. Investment property (continued) 13. Subsidiaries (continued)

2017 2016 Subsequently, Atlantique Telecom S.A. sold the 10% shareholding transactions under common control. Investment property rental income and direct operating expenses AED’000 AED’000 to Maroc Telecom. Consequently, a merger between Maroc Property rental income 9,118 8,224 a) Disclosures relating to subsidiaries Direct operating expenses 809 1,022 Telecom’s subsidiaries, Atlantique Telecom Gabon and Gabon Telecom, was also finalised. The disposal of the 10% shareholding Information relating to subsidiaries that have non-controlling The fair value of the Group’s investment property has been determined based on the Construction Replacement Cost Approach (Cost of Atlantique Telecom Gabon to Maroc Telecom and the merger interests that are material to the Group are provided below: approach), which reflects the amount that would be required currently to replace the service capacity of the asset. The construction of the two subsidiaries have been accounted for by the Group as Maroc Telecom PTCL Etisalat Misr replacement cost of the asset was determined with reference to Turner International Construction Index. Accordingly, the fair value is consolidated consolidated consolidated classified as level 3 of the fair value hierarchy. AED'000 2017 Information relating to non-controlling interests: 13. Subsidiaries Non-controlling interest (shareholding %) 51.6% 76.6% 34% Profit 1,211,073 47,624 69,489 a) The Group’s principal subsidiaries are as follows: Total comprehensive (loss)/profit 672,506 )346,811( 76,229 Dividends )1,342,586( )132,090( - Country of Non-controlling interests as at 31 December 7,113,545 5,188,912 1,365,336 Name incorporation Principal activity Percentage shareholding Summarised information relating to subsidiaries: 2017 2016 Current assets 5,422,168 2,962,379 2,018,425 UAE Telecommunications services 100% 100% Emirates Telecommunications and Marine Services FZE Non-current assets 34,802,538 15,790,439 6,437,306 Emirates Cable TV and Multimedia LLC UAE Cable television services 100% 100% Current liabilities 14,758,876 5,687,714 2,218,676 Holds investment in Pakistan UAE 90% 90% Etisalat International Pakistan LLC Telecommunication Co. Ltd Non-current liabilities 3,475,923 4,780,555 2,122,657 E-Marine PJSC UAE Submarine cable activities 100% 100% AED’000 2016 Etisalat Services Holding LLC UAE Infrastructure services 100% 100% Information relating to non-controlling interests: 51.6% 76.6% 34% Etisalat Software Solutions (Private) Limited India Technology solutions 100% 100% Non-controlling interest (shareholding %) Holds investment in EMTS B.V. Profit/(loss) 1,099,664 )13,408( )22,551( UAE 100% 100% Etisalat International Nigeria Limited (Netherlands) Total comprehensive (loss)/profit )197,216( 7,396 )1,565,021( Etisalat Afghanistan Afghanistan Telecommunications services 100% 100% Dividends )1,480,334( )264,935( )54,052( Etisalat Misr S.A.E. Egypt Telecommunications services 66% 66% Non-controlling interests as at 31 December 6,662,429 5,620,189 935,446 Atlantique Telecom S.A. Togo Telecommunications services 100% 100% Summarised information relating to subsidiaries: Etisalat Lanka (Pvt.) Limited Sri Lanka Telecommunications services 100% 100% Current assets 5,437,055 3,144,443 994,486 31,774,638 16,955,576 5,820,191 Pakistan Telecommunication Company Limited Pakistan Telecommunications services 23%* 23%* Non-current assets Holds investment Société Current liabilities 13,072,614 6,048,884 2,060,273 Etisalat Investment North Africa LLC UAE de Participation dans les 91.3% 91.3% Non-current liabilities 3,576,966 5,159,971 1,997,694 Télécommunications (SPT) Kingdom of Holds investment 91.3% 91.3% b) Movement in non-controlling interests Société de Participation dans les Télécommunications (SPT) Morocco in Maroc Telecom Kingdom of The movement in non-controlling interests is provided below: Telecommunications services 48%* 48%* Etisalat Al Maghrib S.A (Maroc Telecom) Morocco 2017 2016 Holds investment in Etisalat DB AED’000 AED’000 Etisalat Mauritius Private Limited Mauritius 100% 100% Telecom Private Limited As at 1 January 13,213,373 15,886,048 Total comprehensive income: During the year, the Group subscribed to the capital increase of key management personnel. Profit for the year 1,327,880 1,065,877 Remeasurement of defined benefit obligations - net of tax )36,534( )1,325( Etisalat Misr and paid its share of contribution amounting to Exchange differences on translation of foreign operations 436,620 )1,759,489( EGP 2.97 billion (AED 616 million). The movement in the non Previous years’ changes in shareholdings Loss on revaluation of available-for-sale financial assets )28( )1( controlling interests relates to the share of contribution in the The Group completed the sale of its 92.3% shareholding in Canar to Fair value gain arising during the year 843 - Other movement in equity )13,786( )4,853( capital increase by the non controlling interests’ shareholders. The Bank of Khartoum on 7 August 2016 after securing all regulatory Transaction with owners: final allotment and issuance of shares is still in process. approvals from the Sudanese National Telecommunications Disposal of a subsidiary - )27,477( Corporation and the Sudanese competition authorities. Capital contribution by non controlling interest 284,171 - * The Group has voting rights of 53% in both Maroc Telecom Movements in non-controlling interests - )66,844( Repayment of advances to non-controlling interests )76,091( )78,843( and Pakistan Telecommunication Company Limited, including During the previous year, Atlantique Telecom S.A. acquired the Dividends )1,474,676( )1,799,720( the appointment of a majority of the Board of Directors and remaining 10% shareholding in Atlantique Telecom Gabon. As at 31 December 13,661,772 13,213,373

118 119 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

15. Investment in associates and joint ventures (continued)

14. Share of results of associates and joint ventures b) Movement in investments in associates Mobily All Associates 2017 2016 2017 2016 2017 2016 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 Associates (Note 15 b) )220,938( )109,017( Carrying amount at 1 January 4,243,254 4,306,333 4,343,465 4,450,754 Joint ventures (Note 15 f) 13,658 7,667 Share of results (Note 14) )170,726( )64,807( )220,938( )109,017( Total )207,280( )101,350( Additions during the year 83,963 - 106,710 - Other movements )4,520( 1,728 )4,520( 1,728 In February 2017, the Group undertook a corporate restructuring Lenders) by 23 June 2017. The transfer of all of EMTS shares held Carrying amount at 31 December 4,151,971 4,243,254 4,224,717 4,343,465 of its investment in Emerging Markets Telecommunication Services by EMTS BV to the Security Trustee has been made by EMTS BV, c) Reconciliation of the above summarised financial information to the net assets of the associates Limited (“EMTS) and signed a new Shareholders Agreement with and the two Etisalat Group nominees resigned from the Board of Mobily All Associates the other two shareholders in EMTS Holding BV established in the Directors of EMTS on 22 June 2017. The legal formalities required 2017 2016 2017 2016 Netherlands (“EMTS BV”). The result of the restructuring is that the under Nigerian law to give effect to the transfer of the shares are AED’000 AED’000 AED’000 AED’000 Group’s voting rights in EMTS (through its shareholding in EMTS BV) as of the date of this report not completed. Net assets 13,958,784 14,643,890 14,984,681 )1,275,650( decreased to 25% through issuance of a new class of preferential Our share in net assets of associates 3,907,482 4,021,066 4,179,878 4,320,889 244,489 222,188 244,839 222,576 shares in EMTS BV while increasing its stake in the ordinary shares The existing management and technical support related Others* Impairment - - )200,000( )200,000( with non voting rights to 45% through a debt to equity swap, agreements between Etisalat Group and EMTS have been Carrying amount at 31 December 4,151,971 4,243,254 4,224,717 4,343,465 thereby partially converting its shareholder loans into equity. In terminated effective from 30 June 2017. The agreements * “Others” include an amount of AED 150 million (2016: AED 150 million) relating to premium paid on rights issue in prior years. addition, the shareholders of EMTS BV also agreed to waive all the governing the use of Etisalat’s brand and related IP rights have remaining outstanding shareholders loans given to EMTS up to the also terminated effective from 21 July 2017. d) Aggregated amounts relating to associates date of the corporate restructuring being 8 February 2017. Mobily All Associates 2017 2016 2017 2016 Accordingly, since EMTS BV no longer controls EMTS, and AED’000 AED’000 AED’000 AED’000 Further, during the year, EMTS defaulted on a facility agreement the Group does not have significant influence on EMTS, the Current assets 8,169,324 7,618,529 8,394,455 8,394,455 with a syndicate of Nigerian banks (“EMTS Lenders”), and investment in the associate has been derecognised in the Non-current assets 31,461,148 32,790,390 32,483,354 36,503,078 discussions between EMTS and the EMTS Lenders did not produce consolidated financial statements. Current liabilities )11,669,978( )17,518,855( )11,861,317( )20,201,983( an agreement on a debt-restructuring plan. Accordingly, EMTS Non-current liabilities )14,001,710( )8,246,174( )14,031,811( )25,971,200( Net assets 13,958,784 14,643,890 14,984,681 )1,275,650( received a Default and Security Enforcement Notice on 9 June The share of results of Mobily recognised for the year include a Revenue 11,116,897 12,307,325 11,485,050 11,485,050 2017 requiring EMTS BV to transfer 100% of its shares in EMTS to credit adjustment of AED 23 million to comply with the Group’s Loss )694,301( )209,182( )791,086( )8,112,802( United Capital Trustees Limited (the “Security Trustee” of the EMTS accounting policies. Total comprehensive loss )694,301( )209,182( )791,086( )8,112,802(

The share of results and carrying amounts of assets and liabilities of Mobily have been adjusted to comply with the Group accounting policies. 15. Investment in associates and joint ventures e) Market value of an associate a) Associates The shares of one of the Group’s associates are quoted on public stock markets and it is classified as “Level-1” fair value. The market Country of Percentage shareholding value of the Group’s shareholding based on the quoted prices is as follows: incorporation Principal activity Name 2017 2016 2017 2016 Etihad Etisalat Company ("Mobily") Saudi Arabia Telecommunications services 28% 27% AED’000 AED’000 Satellite communication UAE 28% 28% Etihad Etisalat Company ("Mobily") 3,130,408 4,966,376 Thuraya Telecommunications Company PJSC ("Thuraya") services Emerging Markets Telecommunications Services Limited Nigeria Telecommunications services 0% 40% ("EMTS Nigeria") f) Joint ventures Country of Name incorporation Principal activity Percentage shareholding 2017 2016 Installation and ‎management of UAE 50% 50% Ubiquitous ‎Telecommunications ‎Technology LLC ‎network systems Smart Technology Services ‎DWC – LLC ‎ UAE ICT Services 50% 50%

120 121 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

15. Investment in associates and joint ventures (continued) 16. Other Investments (continued)

f) Movement in investment in joint ventures The financial assets at amortised cost/held to maturity investment controlled by the UAE Federal Government. The Group provides 2017 2016 includes investments in Abu Dhabi Government bonds and other telecommunication services to the Federal Government (including AED’000 AED’000 bonds. At 31 December 2017, the market value of the investment Ministries and local bodies). These transactions are at normal Carrying amount at 1 January 70,887 78,220 in these bonds was AED 222 million (2016: AED 147 million). commercial terms. The credit period allowed to Government Share of results 13,658 7,667 customers ranges from 90 to 120 days. Trade receivables include Reclassified during the year 2,471 - Dividends )5,000( )15,000( 17. Related party transactions an amount of AED 1,334 million (2016: AED 1,414 million), which Carrying amount at 31 December 82,016 70,887 are net of allowance for doubtful debts of AED 197 million (2016: Transactions between the Company and its subsidiaries, which are AED 156 million), receivable from Federal Ministries and local g) Aggregated amounts relating to joint ventures related parties, have been eliminated on consolidation and are not bodies. See Note 5 for disclosure of the royalty payable to the 2017 2016 AED’000 AED’000 disclosed in this note. Transactions between the Group and other Federal Government of the UAE. Current assets 372,336 206,963 related parties are disclosed below. Non-current assets 12,297 15,099 In accordance with IAS 24 (revised 2009) Related Party Disclosures Current liabilities )210,683( )79,830( a) Federal Government and state controlled entities the Group has elected not to disclose transactions with the UAE Non-current liabilities )9,475( - As stated in Note 1, in accordance with Federal Law No. Federal Government and other entities over which the Federal Net assets 164,475 142,232 Revenue 416,735 193,940 267/10 for 2009, the Federal Government of the UAE transferred Government exerts control, joint control or significant influence. Profit or loss 27,356 15,796 its 60% holding in the Company to the Emirates Investment The nature of the transactions that the Group has with such The Group has not identified any contingent liabilities or capital commitments in relation to its interest in joint ventures. Authority with effect from 1 January 2008, which is ultimately related parties is the provision of telecommunication services.

16. Other investments Fair value b) Joint ventures and associates through profit Available for Held to Associates Joint Ventures and loss sale investments maturity Total AED’000 AED’000 AED’000 AED’000 2017 2016 2017 2016 At 1 January 2016 33,025 576,008 203,305 812,338 AED’000 AED’000 AED’000 AED’000 Additions 16,774 98,753 949,956 1,065,483 Trading transactions Disposal - )30,500( )363,845( )394,345( Telecommunication services – sales 105,161 110,369 - - Investment revaluation - )154,361( )454,721( )609,082( Telecommunication services – purchases 65,444 123,420 - - Unwinding of interest - - 13,942 13,942 Management and other services 32,399 199,747 1,700 1,710 Exchange differences )1,616( )7,513( - )9,129( Net amount due from related parties as at 31 December 146,059 401,332 41,183 39,311 At 31 December 2016 48,183 482,387 348,637 879,207

Fair value Sales to related parties comprise of the provision of i. Etihad Etisalat Company through profit Amortised and loss FVTOCI cost Total telecommunication products and services (primarily voice traffic and Pursuant to the Communications and Information Technology AED’000 AED’000 AED’000 AED’000 leased circuits) by the Group based on normal commercial terms. Commission’s (CITC) licensing requirements, Mobily entered into At 1 January 2017 48,183 482,387 348,637 879,207 Purchases relate exclusively to the provision of telecommunication a management agreement (“the Agreement”) with the Company Transfer 280,643 )280,643( - - products and services by associates to the Group based on normal as its operator from 23 December 2004. Amounts invoiced by Additions 790,574 57,506 219,693 1,067,773 commercial terms. The net amount due from related parties are the Company relate to annual management fees, fees for staff Disposal )12,701( )59,161( )329,682( )401,544( unsecured and will be settled in cash. The loans due from a related secondments and other services provided under the Agreement. Investment revaluation 146,971 3,937 757 151,665 Unwinding of interest - - )13,848( )13,848( party is subordinated to external borrowings. The term of the Agreement was for a period of seven years Exchange differences 3,627 14,264 - 17,891 and could be automatically renewed for successive periods of At 31 December 2017 1,257,297 218,290 225,557 1,701,144 The principal management and other services provided to the five years unless the Company served a 12 month notice of Group’s associates are set out below based on agreed contractual termination or Mobily served a 6 month notice of termination terms and conditions. prior to the expiry of the applicable period.

122 123 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

17. Related party transactions (continued) 19. Trade and other receivables (continued)

During the year, the Group signed a Technical Services and including maintenance and support services. The ‎Company The Group’s normal credit terms ranges between 30 and 120 days assessment of both the current as well as the forecast direction Support Agreement with Mobily. This agreement is for a period of receives annual income from Thuraya in respect of these services.‎ (2016: 30 and 120 days). of conditions at the reporting date, including time value of money five years. where appropriate. c) Remuneration of key management personnel The Group recognises lifetime expected credit loss (ECL) for trade During the year, the Group acquired additional shareholding of The remuneration of the Board of Directors and other members of receivables, using the simplified approach. The expected credit The Group writes off a trade receivable when there is 0.53% in Mobily. key management personnel of the Company, is set out ‎below. losses on these financial assets are estimated using a provision information indicating that the debtor is in severe financial matrix based on the Group’s historical credit loss experience and difficulty and there is no realistic prospect of recovery, e.g. ii. Thuraya Telecommunications Company PJSC an analysis of the debtor’s current financial position, adjusted when the debtor has been placed under liquidation or has The Company provides a primary gateway facility to Thuraya for factors that are specific to the debtors, general economic entered into bankruptcy proceedings. 2017 2016 conditions of the industry in which the debtors operate and an AED’000 AED’000 Long- term benefits 1,412 1,329 Upto 60 Short-term benefits 57,463 57,969 Trade receivable - days past due as on 31 December 2017 days 61-90 days 90-365 days Over one year Total AED’000 AED’000 AED’000 AED’000 AED’000 18. Inventories 2017 2016 Expected credit loss rate 0 to 50% 0 to 75% 0 to 100% 20 to 100% AED’000 AED’000 Estimated total gross carrying amount 8,074,080 898,350 3,702,410 3,791,613 16,466,453 Subscriber equipment 370,656 404,038 Lifetime Expected credit loss (622,593) (160,404) (714,988) (1,096,646) (2,594,631) Maintenance and consumables 233,201 354,797 Net trade receivables 7,451,487 737,946 2,987,422 2,694,967 13,871,822 Obsolescence allowances )62,567( )50,010( Net Inventories 541,290 708,825 Upto 60 2017 2016 days 61-90 days 90-365 days Over one year Total Movement in obsolescence allowances Trade receivable - days past due as on 31 December 2016 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 At 1 January 50,010 36,451 Ageing of net trade receivables, including amounts due 7,102,686 662,172 2,431,059 3,715,302 13,911,219 Net increase in obsolescence allowances 11,827 24,700 from other telecommunication operators/carriers: Exchange differences 2,303 )10,259( Reclassified as held for sale (Note 36) )1,573( )882( Over one year Total At 31 December 62,567 50,010 Movement in lifetime Expected Credit Losses: AED’000 AED’000 At 1 January 2,118,831 1,954,665 Inventories recognised as an expense during the year in respect 2,730,200 2,288,817 of continuing operations Net increase in allowance for doubtful debts, 467,704 319,809 net of write off Exchange differences 18,555 (139,958) 19. Trade and other receivables Reclassified as held for sale (Note 36) (10,459) (15,685) 2017 2016 At 31 December 2,594,631 2,118,831 AED’000 AED’000 No interest is charged on the trade receivable balances. With respect to the amounts receivable from the services rendered the ‎Group holds AED 220 Amount receivable for services rendered 10,272,890 9,934,519 Amounts due from other telecommunication operators/carriers 6,193,563 6,095,531 million (2016: AED 234 million) of collateral in the form of cash deposits from customers. Total gross carrying amount 16,466,453 16,030,050 Lifetime expected credit loss/Allowances for doubtful debts )2,594,631( )2,118,831( Net trade receivables 13,871,822 13,911,219 20. Finance lease receivables 2017 2016 716,314 562,749 Prepayments AED’000 AED’000 Accrued income 1,437,089 1,408,833 Advances to Suppliers 164,997 113,827 Current finance lease receivables 38,223 - Other receivables 2,500,612 3,073,075 Non-current finance lease receivables 209,491 - At 31 December 18,690,834 19,069,703 Total trade and other receivables 18,690,834 19,069,703 of which current trade and other receivables 18,453,793 18,913,091 of which non-current other receivables 237,041 156,612

124 125 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

20. Finance lease receivables (continued)

20.1 Amounts receivable under finance leases 22. Trade and other payables Present value of minimum Minimum lease payments 2017 2016 lease payments AED’000 AED’000 2017 2016 2017 2016 AED’000 AED’000 AED’000 AED’000 Current Federal royalty 5,735,532 5,010,268 Amounts receivable under finance lease Trade payables 6,603,303 5,898,807 Within one year 57,553 - 38,223 - Amounts due to other telecommunication administrators 5,420,545 5,225,281 Between 2 and 5 years 250,157 - 209,491 - Deferred revenue 3,335,401 3,140,430 307,710 - 247,714 - Advances from customers 601,495 623,182 Less: future finance income )59,996( - Other payables and accruals 11,113,304 10,874,526 Present value of lease payments receivables 247,714 - 247,714 - At 31 December 32,809,580 30,772,494 Allowances for uncollectible lease payments 33,568 - 33,568 - Non-current For finance lease receivables, the Group recognises lifetime of lifetime ECL that is expected to result from default events on a Other payables and accruals 1,477,540 1,558,549 At 31 December 1,477,540 1,558,549 ECL when there has been a significant increase in credit risk financial instrument that are possible within 12 months after the since initial recognition. If, on the other hand, credit risk has reporting date. Federal royalty for the year ended 31 December 2017 is to be paid as soon as the consolidated financial statements have been approved not increased significantly since initial recognition, the Group but not later than 4 months from the year ended 31 December 2017. measures the loss allowance at an amount equal to 12 month ECL. Unguaranteed residual value of assets leased under finance lease 23. Borrowings The assessment of whether lifetime ECL should be recognised is at the end of reporting period are estimated at AED nil. Details of the Group’s bank and other borrowings are as follows: based on significant increases in the likelihood or risk of a default Fair Value Carrying Value occurring since initial recognition instead of on evidence of a The interest rate inherent in the leases is fixed at the contract 2017 2016 2017 2016 financial asset being credit-impaired at the reporting date or an date for the entire lease term. The average effective interest rate AED’000 AED’000 AED’000 AED’000 actual default occurring. contracted is approximately 6.5% per annum. Bank borrowings Bank overdrafts 3,651,427 3,318,881 3,651,427 3,318,881 Lifetime ECL represents the expected credit losses that will All present amounts receivable are guaranteed by an appointed Bank loans 4,517,747 3,871,520 4,598,837 3,934,047 Other borrowings result from all possible default events over the expected life of a guarantor who is obligated to pay unconditionally all due amounts Bonds 16,576,816 15,059,387 15,528,641 14,217,614 financial instrument. In contrast, 12m ECL represents the portion upon failure to pay within 45 days of receiving notice. Loans from non controlling interest - 3,182 - 3,500 Vendor financing 399,098 345,595 481,420 345,595 21. Cash and cash equivalents Others 3,780 3,335 4,081 3,602 2017 2016 25,148,868 22,601,900 24,264,406 21,823,239 AED’000 AED’000 Advances from non controlling interest 548,024 552,027 Maintained locally 24,344,342 20,794,417 Total Borrowings 24,812,430 22,375,266 Maintained overseas, unrestricted in use 1,839,546 2,786,320 Reclassified as held for sale (Note 36) (107,089) (96,626) Maintained overseas, restricted in use 956,205 123,159 Borrowings from continuing operations 24,705,341 22,278,640 Cash and bank balances 27,140,093 23,703,896 of which due within 12 months 4,670,208 4,074,738 Reclassified as held for sale (Note 36) (14,935) (27,726) of which due after 12 months 20,035,133 18,203,902 Cash and bank balances from continuing operations 27,125,158 23,676,170 Advances from non-controlling interest represent advances paid value cannot be reasonably determined. Less: Deposits with maturities exceeding three months from the (23,276,525) (20,680,990) date of deposit by the minority shareholder of Etisalat International Pakistan LLC Cash and cash equivalents from continuing operations 3,848,633 2,995,180 (EIP) towards the Group’s acquisition of its 26% stake in PTCL, net External borrowings of AED 3,564 million (2016: AED 3,129 of repayments. The amount is interest free and is not repayable million) are secured by property, plant and equipment. Cash and cash equivalents comprise cash on hand and short-term, highly liquid investments that are readily convertible to known within 12 months from the statement of financial position date and amounts of cash and which are subject to an insignificant risk of changes in value. These are denominated primarily in UAE Dirham, with accordingly the full amount is carried in non-current liabilities. The On 28 April 2014, the Group had entered into multi-currency financial institutions and banks. Interest is earned on these investments at prevailing market rates. The carrying amount of these assets fair value of advances is not equivalent to its carrying value as it is facilities agreement for EUR 3.15 billion (AED 15.9 billion) with approximates to their fair value. interest-free. However, as the repayment dates are variable, a fair a syndicate of local and international banks for the purpose of

126 127 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

23. Borrowings (continued) 23. Borrowings (continued)

financing the Maroc Telecom’s acquisition. Financing consisted a. 5 years tranche: USD 500 million with coupon rate of 2.375% Carrying Nominal Value Fair Value of two facilities: Tranche A was a twelve months bridge loan per annum Value amounting to EUR 2.1 billion (AED 10.6 billion) at a price of 2016 2016 2016 AED’000 AED’000 AED’000 Euribor plus 45 basis points for the first six months increased by b. 7 years tranche: EUR 1,200 million with coupon rate of 1.750% Bonds 15 basis points in each of the following three months. Tranche B per annum 2.375% US dollar 900 million notes due 2019 3,306,600 3,298,730 3,306,571 was a three years term loan amounting to EUR 1.05 billion (AED 3.500% US dollar 500 million notes due 2024 1,837,000 1,846,332 1,817,984 5.3 billion) at a price of Euribor plus 87 basis points. Both these c. 10 years tranche: USD 500 million with coupon rate of 3.500% Bonds in net investment hedge relationship tranches have been settled in June 2014 following issuance of per annum 1.750% Euro 1,200 million notes due 2021 4,609,320 4,792,633 4,564,684 2.750% Euro 1,200 million notes due 2026 4,609,320 5,121,692 4,528,375 bonds as mentioned below. At 31 December 2016 14,362,240 15,059,387 14,217,614 d. 12 years tranche: EUR 1,200 million with coupon rate of of which due within 12 months - On 22 May 2014, the Group had completed the listing of USD 2.750% per annum of which due after 12 months 14,217,614 7 billion (AED 25.7 billion) Global Medium Term Note (GMTN) programme which will be used to meet medium to long-term The effective date for the bonds term was 18 June 2014. Net The terms and conditions of the Group’s bank and other borrowings are as follows: funding requirements on the Irish Stock Exchange (“”ISE””). proceeds from the issuance of the bonds were used for repayment Carrying Value Under the programme, Etisalat can issue one or more series of of previously outstanding facilities of EUR 3.15 billion. 2017 2016 Year of Curreny Interest rate conventional bonds in any currency and amount up to USD 7 maturity AED’000 AED’000 billion. The listed programme was rated Aa3 by Moody’s, AA- by In May 2015, the Group issued additional bonds amounting to Variable interest borrowings Secured Bank Loans 2023 USD LIBOR + 2.9% 1,007,254 956,626 Standard & Poor’s and A+ by Fitch. USD 400 million under the existing USD 5 years tranches. Lending Secured Bank Loans 2023 EGP Corridor 0.5%- 1,227,252 936,990 0.75% On 11 June 2014, the Group issued the inaugural bonds under As at 31 December 2017, the total amounts in issue under this Lending Unsecured bank overdrafts 2018 EGP Corridor 0.10% 295,394 - the GMTN programme. The issued bonds were denominated in US programme split by currency are USD 1.4 billion (AED 5.14 billion) to 0.25% Bill discount Dollars and Euros and consisted of four tranches: and Euro 2.4 billion (AED 10.53 billion) as follows: 2021 PKR 480,601 345,595 Unsecured Vendor Financing rate-0.7% Mid Corridor Unsecured Overdrafts 2018 EGP 44,230 574,217 Nominal Carrying +0.75% Fair Value Secured bank loan 2018 LKR 3M SLIBOR+4% 7,494 15,452 Value Value 3 moth 2023 PKR 910,573 944,125 Secured Bank Loans Kibor+0.25% 2017 2017 2017 6M LIBOR + Secured Bank Loans 2019 USD 47,731 68,216 AED’000 AED’000 AED’000 1.6% Unsecured Bank Loans 2018 USD 3M Libor + 1.9% 33,224 169,901 Bonds 1M LIBOR and Unsecured bank overdrafts 2018 USD 107,873 - 2.375% US dollar 900 million notes due 2019 3,306,600 3,313,510 3,306,576 4.20% 6 Month KIBOR 2023 PKR 49,950 - 3.500% US dollar 500 million notes due 2024 1,837,000 1,885,019 1,820,230 Secured Bank loans + 1.1% Bonds in net investment hedge relationship Fixed interest borrowings 1.750% Euro 1,200 million notes due 2021 5,263,680 5,529,970 5,222,511 Unsecured bank overdrafts 2018 MAD 10% 2,950,784 2,552,857 Unsecured Bank Loans 2018 FCFA 4.45% 105,114 272,476 2.750% Euro 1,200 million notes due 2026 5,263,680 5,848,317 5,179,324 Secured Bank Loans 2018 FCFA 4.68% - 141,845 At 31 December 2017 15,670,960 16,576,816 15,528,641 Secured Bank Loans 2018 FCFA 8% 65,458 140,432 of which due within 12 months - UnSecured Bank Loans 2018-2020 FCFA 6% 286,426 - of which due after 12 months 15,528,641 Secured Bank Loans 2021 FCFA 7% 111,130 - UnSecured Bank Loans 2019 FCFA 5% 341,267 - Unsecured Bank Loans 2018-2022 FCFA 5% 162,259 - Unsecured loans from non-controlling interests 2017 EGP 10% - 3,500 Unsecured Overdrafts 2018 FCFA 8.0% 59,399 162,945

128 129 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

23. Borrowings (continued)

Other borrowings As at the end of the reporting period the Group has cross currency USD-EUR swaps which are designated as hedges of net investment. Advances from non-controlling interests N/A USD Interest free 548,024 552,027 The fair value of the cross currency swaps are calculated by discounting the future cash flows to net present value using appropriate Bonds 2019 USD 2.375% 1,833,017 1,830,443 Bonds 2019 USD 2.375% 1,473,559 1,476,128 market interest and prevailing foreign currency rates. The fair value of swaps is as follows: Bonds 2024 USD 3.500% 1,820,230 1,817,984 Bonds 2021 EUR 1.750% 5,222,511 4,564,684 Bonds 2026 EUR 2.750% 5,179,323 4,528,375 2017 2016 Others Various Various Various 442,353 320,448 AED’000 AED’000 Total Borrowings 24,812,430 22,375,266 Fair value of forward contract/ swaps designated as net investment hedge (Derivative financial assets) 8,172 331,313 Reclassified as held for sale (Note 36) (107,089) (96,626) Fair value of interest rate swaps (Derivative financial assets) 2,309 - Borrowings from continuing operations 24,705,341 22,278,640 Fair value of swaps designated as net investment hedge (Derivative financial liabilities) (79,149) )2,830( a) Interest rates The fair value of bonds designated as hedge is disclosed in note 23. During the year, the Group executed the unwinding of a USD - EUR The weighted average interest rate paid during the year on bank and other borrowings is set out below: cross currency swap and received cash of AED 173 million (2016: AED 283 million). 2017 2016

Bank borrowings 8.2% 6.6% Other borrowings 2.6% 2.6% b) Available facilities 25. Payables related to investments and licenses At 31 December 2017, the Group had AED 3,369 million (2016: AED 2,794 million) of undrawn committed borrowing facilities in respect Current Non-current Total AED’000 AED’000 AED’000 of which all conditions precedent had been met. At 31 December 2017

Investments Reconciliation of liabilities arising from financing activities Etisalat International Pakistan LLC 2,936,653 - 2,936,653 The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Atlantique Telecom S.A. 11,022 - 11,022 Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s Licenses Maroc Telecom 321,841 90,353 412,194 consolidated statement of cash flows from financing activities. 3,269,516 90,353 3,359,869 The terms and conditions of the Group’s bank and other borrowings are as follows:‎ At 31 December 2016 Opening Exchange Closing Investments Balance Proceeds Repayments differences balance Etisalat International Pakistan LLC 2,936,653 - 2,936,653 11,022 - 11,022 AED’000 AED’000 AED’000 AED’000 AED’000 Atlantique Telecom S.A. Licenses Borrowings and finance lease obligations 22,289,057 3,558,667 (2,954,075) 1,816,874 24,710,523 Maroc Telecom 149,981 149,981 299,962 Pakistan Telecommunication Company Limited 157,671 392,987 550,658 24. Net investment hedge relationships 3,255,327 542,968 3,798,295

In prior years, Euro bonds issued (refer to note 23) and cross currency swaps have been designated as net investment hedges. There was According to the terms of the share purchase agreement between Etisalat International Pakistan LLC and the Government of Pakistan no material ineffectiveness of these hedges recorded as at the end of the reporting period. (“GOP”) payments of AED 6,612 million (2016: AED 6,612 million) have been made to GOP with the balance of AED 2,937 million (2016: AED 2,937 million) to be paid. The amounts payable are being withheld pending completion of certain conditions in the share purchase 2017 2016 agreement related to the transfer of certain assets to PTCL. AED’000 AED’000 Effective part directly recognised in other comprehensive income )1,148,302( 250,656

130 131 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

25. Payables related to investments and licenses (continued)

All amounts payable on acquisitions are financial liabilities measured at amortised cost and are mostly denominated in either USD, 28. Provision for end of service benefits AED or PKR. The liabilities recognised in the consolidated statement of financial position are: 26. Finance lease obligations 2017 2016 Present value of minimum Minimum lease payments AED’000 AED’000 lease payments Funded Plans 2017 2016 2017 2016 AED’000 AED’000 AED’000 AED’000 Present value of defined benefit obligations 3,792,700 3,871,929 Less: Fair value of plan assets (3,694,514) (3,689,910) Amounts payable under finance lease 98,186 182,019 Within one year 3,577 6,196 3,273 5,512 Unfunded Plans Between 2 and 5 years 1,965 5,252 1,909 4,905 Present value of defined benefit obligations and other 1,510,596 1,454,940 5,542 11,448 5,182 10,417 employee benefits Less: future finance charges (360) (1,031) - - Total 1,608,782 1,636,959 Present value of lease obligations 5,182 10,417 5,182 10,417 of which due within 12 months 3,273 5,512 3,273 5,512 The movement in defined benefit obligations for funded and unfunded plans is as follows: of which due after 12 months 1,909 4,905 1,909 4,905 2017 2016 AED’000 AED’000 It is the Group policy to lease certain of its plant and machinery under finance leases. For the year ended 31 December 2017, the As at 1 January 5,326,867 5,177,061 Reclassified as held for sale (Note 36) (79) (2,631) average effective borrowing rate was 19% (2016: 19%). The fair value of the Group’s lease obligations is approximately equal to Service cost 151,263 171,036 their carrying value. Interest cost 486,307 472,745 Actuarial gain/(loss) 670 9,106 Remeasurements (62,920) (70,006) 27. Provisions Benefits paid (389,332) (492,621) Asset retirement Gain and loss on settlement - 76,920 obligations Other Total Exchange difference (209,480) (14,743) AED’000 AED’000 AED’000 As at 31 December 5,303,296 5,326,867 At 1 January 2016 33,321 2,093,331 2,126,652 Additional provision during the year 3,614 1,490,867 1,494,481 The movement in the fair value of plan assets is as follows: Reclassified as held for sale (Note 36) (12,516) (3,098) (15,614) 2017 2016 Utilization of provision - (305,965) (305,965) AED’000 AED’000 Release of provision - (66,172) (66,172) As at 1 January 3,689,908 3,266,580 Adjustment for change in discount rate 968 - 968 Interest income 400,939 368,606 Exchange differences (15,054) (581,314) (596,368) Return on plan assets excluding amounts included in interest (129,019) (61,077) At 31 December 2016 10,333 2,627,649 2,637,982 income Included in current liabilities - 2,488,839 2,488,839 Contributions received 186,046 422,578 Included in non-current liabilities 10,333 138,810 149,143 Benefits paid (266,525) (311,096) At 1 January 2017 10,333 2,627,649 2,637,982 Others 1,865 5,538 Additional provision during the year 2,445 574,273 576,718 Exchange difference (188,700) (1,221) Reclassified as held for sale (Note 36) (560) (777) (1,337) As at 31 December 3,694,514 3,689,908 Utilization of provision - (366,431) (366,431) Release of provision - (245,324) (245,324) The amount recognised in the statement of profit or loss is as follows:‎ 549 94,660 95,209 Exchange differences 2017 2016 At 31 December 2017 12,767 2,684,050 2,696,817 AED’000 AED’000 Included in current liabilities - 2,509,251 2,509,251 Service cost 150,983 170,730 Included in non-current liabilities 12,767 174,799 187,566 Net Interest cost 85,109 103,764 At 31 December 2017 12,767 2,684,050 2,696,817 Others (4,127) 76,842 231,965 351,336

132 133 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

28. Provision for end of service benefits (continued)

Following are the significant assumptions used relating to the major plans 29. Share capital 2017 2016 2017 2016 AED’000 AED’000 Discount rate Authorised: UAE 3.76% 3.13% 10,000 million (2016: 10,000 million) ordinary shares of AED 1 each 10,000,000 10,000,000 Pakistan 11% 9.5% - 11% Morocco 3.2% - 7.5% 3.4% Issued and fully paid up: Average annual rate of salary 8,696.8 million (2016: 8,696.8 million) ordinary shares of AED 1 each 8,696,754 8,696,754 UAE 2% - 2.5% 3.5% Pakistan 7% - 10% 7% - 10% 30. Reserves Morocco 3% - 5% 4%-5% 2017 2016 The movement in the Reserves is provided below: Plan assets for funded plan are comprised as follows: AED’000 AED’000 As at 1 January 26,121,149 27,583,434 2017 2016 Total comprehensive loss for the year (126,747) (2,593,866) AED’000 AED’000 Transfer from retained earnings 994,434 1,131,581 3,133,481 3,154,439 Debt instruments - unquoted As at 31 December 26,988,836 26,121,149 206,864 243,198 Cash and cash equivalents Translation reserve 305,451 285,388 Investment property As at 1 January (6,233,385) (3,590,118) 220 278 Fixed assets Exchange differences on translation of foreign operations 1,017,608 (2,893,923) Other assets 87,738 59,469 (Loss)/gain on hedging instruments designated in hedges of the net (1,148,302) 250,656 less: liabilities (39,239) (52,862) assets of foreign operations 3,694,515 3,689,910 As at 31 December (6,364,079) (6,233,385)

Investment revaluation reserve Through its defined benefit pension plans, PTCL is exposed to a number of actuarial and investment risks, the most significant of which As at 1 January 51,016 1,615 include, interest rate risk, property market risk, longevity risk for pension plan and salary risk for all plans. Gain/(loss) on revaluation 3,947 (142,520) Cumulative loss on investments in equity instruments designated as at - (2,838) AFS transferred to retained earnings upon disposal The expense recognised in profit or loss relating to defined contribution plan at the rate specified in the rules of the plans amounting to Reclassification adjustment relating to available-for-sale financial assets - 194,759 impaired during the year AED 166 million (2016: AED 170 million). Transfer from investment revaluation reserve to retained earnings on (47,687) - application of IFRS 9 As at 31 December 7,276 51,016

Development reserve 7,850,000 7,850,000

Asset replacement reserve As at 1 January 8,234,600 8,190,286 Transfer from retained earnings 47,000 44,314 As at 31 December 8,281,600 8,234,600

Statutory reserve As at 1 January 2,141,596 1,039,519 Transfer from retained earnings 984,425 1,102,077 As at 31 December 3,126,021 2,141,596

General reserve As at 1 January 14,077,322 14,092,132 Transfer from retained earnings 10,696 (14,810) As at 31 December 14,088,018 14,077,322

134 135 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

30. Reserves (continued) 31. Financial instruments (continued)

a) Development reserve, asset replacement reserve Company’s share of the reserve has accordingly been disclosed in Categories of financial instruments and general reserve the consolidated statement of changes in equity. The Group’s financial assets and liabilities consist of the following: These reserves are all distributable reserves and comprise amounts 2017 transferred from unappropriated profit at the discretion of the c) Translation reserve AED’000 Group to hold reserve amounts for future activities including the Cumulative foreign exchange differences arising on the translation Financial assets Amortised cost financial assets; issuance of bonus shares. of overseas operations are taken to the translation reserve. Due from related parties 187,242 Finance lease receivables 247,714 b) Statutory reserve d) Investment revaluation reserve Trade and other receivables, excluding prepayments 17,974,520 In accordance with the UAE Federal Law No. 2 of 2015, and The investments revaluation reserve represents the cumulative Cash and bank balances 27,125,158 Investment carried at amortised cost 225,557 the respective Articles of Association of some of the Group’s gains and losses arising on the revaluation of investments in 45,760,191 subsidiaries, 10% of their respective annual profits should equity instruments designated as at FVTOCI, net of cumulative Financial assets carried at fair value through OCI 218,290 be transferred to a non-distributable statutory reserve. The gain/loss transferred to retained earnings upon disposal. Fair value through profit or loss 1,257,297 Derivative financial instruments 10,481 47,246,259 Financial liabilities 31. Financial instruments Other financial liabilities held at amortised cost: Trade and other payables, excluding deferred revenue 30,951,719 Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and Borrowings 24,705,341 the bases of recognition of income and expenses) for each class of financial asset and financial liability are disclosed in Note 2. Payables related to investments and licenses 3,359,869 Finance lease obligations 5,182 Capital management Derivative financial instruments 79,149 59,101,260 The Group’s capital structure is as follows: 2017 2016 AED’000 AED’000 The Group’s financial assets and liabilities consist of the following:‎ Bank borrowings (8,143,175) (7,156,302) 2016 Bonds (15,528,641) (14,217,614) AED’000 Other borrowings (1,033,525) (904,724) Financial assets Finance lease obligations (5,182) (10,417) Loans and receivables, held at amortised cost: Cash and bank balances 27,125,158 23,676,170 Due from related parties 440,643 Net funds 2,414,635 1,387,113 Finance lease receivables - Total equity 57,703,975 55,914,778 Trade and other receivables, excluding prepayments 18,506,954 Cash and bank balances 23,676,170 42,623,767 The capital structure of the Group consists of bonds, bank and The limits are assessed, and revised as deemed appropriate, based Available-for-sale financial assets (including other investments held for sale) 482,387 other borrowings, finance lease obligations, cash and bank on various considerations including the anticipated funding Fair value through profit or loss 48,183 balances and total equity comprising share capital, reserves and requirements of the Group and the weighted average cost Held-to-maturity investments 348,637 retained earnings. of capital. The overall objective is to maximise returns to its Derivative financial instruments 331,313 43,834,287 shareholders and benefits for other stakeholders and to maintain Financial liabilities “The Group monitors the balance between equity and debt an optimal capital structure to reduce the cost of capital. Other financial liabilities held at amortised cost: financing and establishes internal limits on the maximum amount Trade and other payables, excluding deferred revenue 29,190,613 of debt relative to earnings. Borrowings 22,278,640 Payables related to investments and licenses 3,798,295 Finance lease obligations 10,417 Derivative financial instruments 2,830 55,280,795

136 137 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

31. Financial instruments (continued) 31. Financial instruments (continued)

Financial risk management objectives investments in foreign operations. with under normal market conditions. The key inputs are the yield African Franc. These five currencies account for a significant The Group’s corporate finance function monitors the domestic and curves, basis curves and foreign exchange rates. In accordance portion of the impact of net profit, which is considered to international financial markets relevant to managing the financial The Group has foreign currency transactional exposure to with the fair value hierarchy within IFRS 7 Financial Instruments: materially occur through cash and borrowings within the risks relating to the operations of the Group. Any significant exchange rate risk as it enters into contracts in other than the Disclosure, the fair value of cross currency swaps represent Level Group’s financial statements in respect of subsidiaries and decisions about whether to invest, borrow funds or purchase functional currency of the entity (mainly USD and Euro). The 2 fair values. associates whose functional currency is not the Dirham. The derivative financial instruments are approved by either the Board Group entities also enter into contract in it’s functional currencies impact has been determined by assuming a weakening in of Directors or the relevant authority of either the Group or of the including Nigerian Naira, Egyptian Pounds, Pakistani Rupee, Sri Foreign currency sensitivity the foreign currency exchange of 10% upon closing foreign individual subsidiary. The Group’s risk includes market risk, credit Lankan Rupee, Afghani, and Moroccan Dirham. Etisalat UAE also The following table presents the Group’s sensitivity to a 10 exchange rates. A positive number indicates an increase in risk and liquidity risk. enters into contracts in USD which is pegged to AED. Atlantique per cent change in the Dirham against the , the net cash and borrowings balance if the AED/USD were to Telecom Group enters into Euros contracts as CFA is pegged the Euro, the Pakistani Rupees, Moroccan Dirham and Central strengthen against the foreign currency. The Group takes into consideration several factors when to Euro and Maroc Telecom also enters into Euro contracts as Impact on profit and loss Impact on equity determining its capital structure with the aim of ensuring Moroccan Dirham is 60% pegged to Euro. The Group enters into a 2017 2016 2017 2016 sustainability of the business and maximizing the value to variety of derivative financial instruments to manage its exposure AED’000 AED’000 AED’000 AED’000 shareholders. The Group monitors its cost of capital with a goal to interest rate and foreign exchange rate risk, including Increase/decrease in profit/(loss) and in equity Egyptian pounds 60,397 90,168 - - of optimizing its capital structure. In order to do this, the Group forward foreign exchange contracts, interest rate swaps and Euros 235,446 238,174 799,197 668,485 monitors the financial markets and updates to standard industry cross currency swaps. Pakistani rupees 54,772 21,062 - - Moroccan Dirhams 292,098 252,476 - - approaches for calculating weighted average cost of capital, Central African Franc 78,217 32,523 - - or WACC. The Group also monitors a net financial debt ratio to In addition to transactional foreign currency exposure, a foreign Interest rate risk purposes. See Note 16 for further details on the carrying value obtain and maintain the desired credit rating over the medium currency exposure arises from net investments in the Group The Group is exposed to interest rate risk as entities in the Group of these investments. term, and with which the Group can match the potential cash entities whose functional currency differs from the Group’s borrow funds at both fixed and floating interest rates. The Group flow generation with the alternative uses that could arise presentation currency (AED). The risk is defined as the risk of monitors the market interest rates in comparison to its current If equity price had been 5% higher or lower: at all times. These general principles are refined by other fluctuation in spot exchange rates between the functional borrowing rates and determines whether or not it believes it • profit for the year ended 31 December 2017 would increase/ considerations and the application of specific variables, such as currency of the net investments and the Group’s presentation should take action related to the current interest rates. This decrease by AED 17.9 million due to changes in fair value country risk in the broadest sense, or the volatility in cash flow currency. This will cause the amount of the net investment to includes a consideration of the current cost of borrowing, the recorded in profit/loss for equity shares classified as fair value generation, or the applicable tax rules, when determining the vary. Such a risk may have a significant impact on the Group’s projected future interest rates, the cost and availability of derivate through profit and loss and an amount of AED 0.7 million Group’s financial structure. consolidated financial statements. financial instruments that could be used to alter the nature of the (2016: AED 9.7 million) as loss/profit realised on impairment/

interest and the term of the debt and, if applicable, the period for disposal of investments in equity shares classified as FVTOCI. Market risk This translation risk does not give rise to a cash flow exposure. Its which the interest rate is currently fixed. The Group’s activities expose it primarily to the financial risks of impact arises only from the translation of the net investment into • other comprehensive income for the year ended 31 December changes in foreign currency exchange rates, interest rates and the group’s presentation currency. This procedure is required in Interest rate sensitivity 2017 would increase/decrease by AED 1.5 million (2016: price risks on equity investments. From time to time, the Group preparing the Group’s consolidated financial statements as per the Based on the borrowings outstanding at 31 December 2017, if increase/decrease by AED 15.4 million) as a result of the will use derivative financial instruments to hedge its exposure to applicable IFRS. interest rates had been 2% higher or lower during the year and changes in fair value of equity shares classified as FVTOCI. currency risk. There has been no material change to the Group’s all other variables were held constant, the Group’s net profit exposure to market risks or the manner in which it manages and The cross currency swaps involve the exchange of principal and and equity would have decreased or increased by AED 77 million b) Credit risk management measures the risk during the year. floating or fixed interest receipts in the foreign currency in which (2016: AED 79 million). This impact is primarily attributable to the Credit risk refers to the risk that the counterparty will default on the issued bonds are denominated, for principal and floating or Group’s exposure to interest rates on its variable rate borrowings. its contractual obligations resulting in financial loss to the Group Foreign currency risk fixed interest payments in the Company’s functional currency. and arises principally from the Group’s bank balances and trade The Company’s presentation/functional currency is United The fair value of a cross currency is determined using standard Other price risk and other receivables. The Group has adopted a policy of only Arab Emirates Dirham (“AED”). Foreign currency risk arises methods to value cross currency swaps and is the estimated The Group is exposed to equity price risks arising from its equity dealing with creditworthy counterparties and obtaining sufficient from transactions denominated in foreign currencies and net amount that the swap contract can be exchanged for or settled investments. Equity investments are mainly held for trading collateral, where appropriate, as a means of mitigating the risk of

138 139 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

31. Financial instruments (continued) 31. Financial instruments (continued) b) Credit risk management (continued) c) Liquidity risk management (continued)

Financial liabilities are repayable as follows: financial loss from defaults. The Group’s exposure and the credit factors in determining with which banks and /corporate to invest Trade and Payables ratings of its counterparties are monitored and the aggregate its money including but not limited to the financial health, other payables, related to Derivative AED’000 value of transactions concluded is spread amongst approved Government ownership (if any), the rating of the bank by rating excluding investments Finance lease financial counterparties. agencies The assessment of the banks and the amount to be deferred revenue Borrowings and licenses obligations liability Total invested in each bank is assessed annually or when there are On demand or within one year 28,872,684 4,670,214 3,269,516 3,273 79,149 36,894,836 In the second year 401,306 4,844,157 90,353 1,909 - 5,337,725 For its surplus cash investments, the Group considers various significant changes in the marketplace. In the third to fifth years inclusive 656,547 7,677,007 - - - 8,333,554 After the fifth year 419,687 7,513,963 - - - 7,933,650 As At 31 December 2017 30,350,224 24,705,341 3,359,869 5,182 79,149 58,499,765 Group’s bank balance 2017 2016 Investment in UAE 90% 88% On demand or within one year 27,008,882 4,074,738 3,255,327 5,512 2,830 34,347,289 Investment outside of the UAE 10% 12% In the second year 637,501 1,228,152 200,098 4,905 - 2,070,656 In the third to fifth years inclusive 820,039 9,675,923 140,088 - - 10,636,050

After the fifth year 101,009 7,299,827 202,782 - - 7,603,618 Bank rating for Investment in UAE As At 31 December 2016 28,567,431 22,278,640 3,798,295 10,417 2,830 54,657,614 2017 2016 AED Rating AED Rating The above table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which By Moody's 6.2 billion A3 4.0 billion A1 the Group can be required to pay. The table includes both interest and principal cash flows. 6.0 billion Aa3 4.1 billion Aa3

5.1 billion Baa1 2.0 billion Baa1 d) Fair value measurement of financial assets and liabilities 2.7 billion A1 1.9 billion A2 By S&P 1.5 billion A1u 2.6 billion BBB+ Fair value hierarchy as at 31 December 2017 Carrying value Level 1 Level 2 Level 3 Total The Group’s trade receivables consist of a large number of the Board of Directors, which has built an appropriate liquidity AED’000 AED’000 AED’000 AED’000 AED’000 customers, spread across diverse industries and geographical risk management framework for the management of the Group’s Financial assets Finance lease receivables 247,714 - 298,341 - 298,341 areas. Ongoing credit evaluation is performed on the financial short, medium and long-term funding and liquidity management Investment carried at amortised cost 225,557 225,554 - - 225,554 condition of accounts receivable and, where appropriate, requirements. The Group manages liquidity risk by maintaining Financial assets classified at fair value through OCI 218,290 29,464 - 188,826 218,290 collateral is received from customers usually in the form of a cash adequate reserves, banking facilities and reserve borrowing Financial assets carried at fair value through profit or loss 1,257,297 358,758 858,765 39,774 1,257,297 deposit. facilities by continuously monitoring forecast and actual cash Derivative financial assets 10,481 - 10,481 - 10,481 1,959,339 613,776 1,167,587 228,600 2,009,963 The carrying amount of financial assets recorded in the flows and matching the maturity profiles of financial assets and Financial liabilities consolidated financial statements, net of any allowances for liabilities. The details of the available undrawn facilities that the Borrowings 24,264,406 - 25,148,868 - 25,148,868 losses, represents the Group’s maximum exposure to credit risk Group has at its disposal at 31 December 2017 to further reduce Derivative financial liabilities 79,149 - 79,149 - 79,149 without taking account of the value of any collateral obtained. liquidity risk is included in Note 23. The majority of the Group’s 24,343,555 - 25,228,017 - 25,228,017 financial liabilities as detailed in the consolidated statement of Fair value hierarchy as at 31 December 2016 c) Liquidity risk management financial position are due within one year. Level 1 Level 2 Level 3 Total Ultimate responsibility for liquidity risk management rests with AED’000 AED’000 AED’000 AED’000 Financial assets Derivative financial assets - 331,313 - 331,313 Other Investments 454,323 - 424,884 879,207 454,323 331,313 424,884 1,210,520 Financial liabilities Borrowings - 22,601,900 - 22,601,900 - 22,601,900 - 22,601,900

140 141 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

31. Financial instruments (continued) d) Fair value measurement of financial assets and liabilities (continued)

Level 1 classification comprises financial instruments where fair approximate their fair values. 32. Commitments value is determined by unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 classification comprises The fair value of the Group’s investment property for an amount a) Capital commitments items where fair value is determined from inputs other than of AED 53 million (2016: AED 70.3 million) has been determined The Group has approved future capital projects and investments commitments to the extent of AED 5,124 million quoted prices that are observable for the asset or liability, based on the Construction Replacement Cost Approach (Cost (2016: AED 5,711 million). The Group has issued letters of credit amounting to AED 514 million (2016: AED 378 million). either directly or indirectly. Level 3 classification comprises approach), which reflects the amount that would be required unobservable inputs. currently to replace the service capacity of the asset. The b) Operating lease commitments construction replacement cost of the asset was determined with 2017 2016 i) The Group as lessee AED’000 AED’000 Some of the Group’s financial assets and liabilities are measured reference to Turner International Construction Index. Accordingly, Minimum lease payments under operating leases recognised 356146 442334 at fair value or for which fair values are disclosed. Information on the fair value is classified as level 3 of the fair value hierarchy. as an expense in the year (Note 5) how these fair values are determined are provided below: At the end of the reporting period, the Group had outstanding commitments for future minimum lease payments under non-cancellable The fair value of other investments amounting to AED 229 million operating leases, which fall due as follows:‎ (2016: AED 424 million) are classified as Level 3 because the • Borrowings are measured and recorded in the consolidated 2017 2016 statement of financial position at amortised cost and their investments are not listed and there are no recent arm’s length AED’000 AED’000 transactions in the shares. The valuation technique applied is fair values are disclosed in Note 23. Within one year 268,816 251,241 • Derivative financial instrument fair values are present values internally prepared valuation models using future cash flows Between 2 to 5 years 734,582 661,306 determined from future cash flows discounted at rates discounted at average market rates. Any significant change in After 5 years 584,968 520,404 1,588,366 1,432,951 derived from market sourced data. these inputs would change the fair value of these investments. • Listed securities and Sukuk are classified as available for sale Operating lease payments represent rentals payable by the Group for certain of its office and retail properties. Leases are negotiated for financial assets and held to maturity investments respectively There have been no transfers between Level 2 and 3 during the an average term of one to ten years. and their fair values are derived from observable quoted year. The fair values of the financial assets and financial liabilities market prices for similar items. These represent Level 1 fair included in the level 2 and level 3 categories above have been ii) The Group as lessor values. Unquoted equity securities represent Level 3 determined in accordance with generally accepted pricing models Property rental income earned during the year was AED 20 million (2016: AED 18 million). All of the properties held have committed fair values. Details are included in note 16 “Other investments. based on cash flows discounted at rates derived from market tenants for the next 5 years. sourced data.

The carrying amounts of the other financial assets and At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments: liabilities recorded in the consolidated financial statements 2017 2016 2017 2016 AED’000 AED’000 AED’000 AED’000 Reconciliation of Level 3 Within one year 8,468 18,516 As at 1 January 424,884 233,784 Between 2 to 5 years 28,000 284 Additions 58,170 991,138 36,468 18,800 Foreign exchange difference 18,645 (466,503) Disposal (257,062) (340,150) 33. Contingent liabilities Revaluation - 6,462 Other movement (16,037) 153 a) Bank guarantees As at 31 December 228,600 424,884 2017 2016 AED’000 AED’000 i) Performance bonds and guarantees in relation to contracts 1,653 876 Companies Overseas investments 1,416 1,080

142 143 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

33. Contingent liabilities (continued) 33. Contingent liabilities (continued)

b) Foreign exchange regulations and/or other reasons. by such committee. Mobily has received (2) preliminary verdicts countries which with the exception of Togo were denied or have On 23 July 2011, Etisalat DB Telecom Pvt Limited (“Etisalat DB”) Multiple legal cases were filed by Mobily against CITC at the Board and (141) final verdicts in its favor in these claims and (13) cases been stalled by the local Courts while the execution measures received a show cause notice from the Directorate of Enforcement of Grievances to oppose such resolutions of the CITC’s committee have been either dismissed or abandoned and (20) cases are on- allowed by a first instance court in Togo have been appealed and (the ED) of India alleging certain breaches of the Foreign in accordance with the Telecommunication regulations. The status going as of 31 December 2017. suspended and are still under dispute. On the substance of the Exchange Management Act 1999 (FEMA), by Etisalat DB and its 5 of these legal cases as of 31 December 2017, was as follows: award itself, Atlantique Telecom has initiated legal proceedings Directors (at the time of the alleged breach). By adjudication order Forty Four (44) shareholder claims have been made against the before the Appeal Court of Cotonou in order to obtain the dated 22 January 2018, the ED made no adverse finding against • There are 635 legal cases filed by Mobily against CITC 2013/2014 members of the Board of Mobily and others, and these cancellation of the award of this third arbitration process and the 2 Etisalat nominated Directors. The decision may be appealed amounting to approximately Saudi Riyals 672 million; have been filed with the Committee for Resolution and Settlement the suspension of any execution thereof. The court decision on by any aggrieved party, within 45 days of the order. of Disputes (“CRSD”). These proceedings have been suspended by the request for stay of execution was granted in June 2017, the • The Board of Grievance has issued 163 preliminary verdicts in the CRSD pending its final determination of Saudi Capital Market decision on the cancellation of the award of this arbitration c) Other contingent liabilities favor of Mobily voiding 163 resolutions of the CITC’s violation Authority (“CMA”) claims against members of the 2013/14 Board is being regularly postponed for reasons of procedure or i) The Group and its associates are disputing certain charges from committee with total penalties amounting to approximately of Mobily (“Defendants”). constitutional challenges by of SARCI (which have been rejected) the governmental and telecom regulatory agencies and telecom Saudi Riyals 467 million; and and also for reasons inherent to the organization of the Beninese operators in the UAE and certain other jurisdictions but do not As noted above, the CMA has launched claims against the justice system. In its last session, the Court required the General expect any material adverse effect on the Group’s financial • There are also final verdicts that have been issued in favor Defendants in January 2016. Pursuant to these proceedings, the Attorney of the Republic of Benin to opine on the matter and as position and results from resolution of these. of Mobily (after they were affirmed by the appeal court) CRSD has upheld three (3) of the seven (7) claims brought up by of the day of this note no new hearing date has been scheduled. resulting in cancellation of penalties with an approximate the CMA and the Defendants are currently appealing the decision ii) The Honorable Supreme Court of Pakistan (Apex Court) disposed total amount of Saudi Riyals 432 million. to the Appellate Bench of the CRSD. In case of a final adverse v) In April 2016, Etisalat Misr received notice of arbitration the Review Petitions filed by PTCL, a subsidiary of the Group, decision, the Board members will seek D&O insurance cover. proceedings initiated by Vodafone Egypt Telecommunication the Pakistan Telecommunication Employees Trust (“PTET”) and In addition, 23 legal cases were filed by Mobily against CITC in Company (Vodafone). Vodafone is seeking to recover outstanding the Federal Government (collectively, the Review Petitioners) relation to the mechanism of calculating the governmental fees iv) In the prior years, Atlantique Telecom SA, a subsidiary of the interconnection fees payable as a result of principle set by the vide the order dated 17th May 2017. Through the said order, the and other subjects in which 16 of them are specifically related Group, has been engaged in arbitration proceedings against SARCI Egyptian Administrative Court’s decision nullifying the National Apex Court directed the Review Petitioners to seek remedy under to the governmental fees as of 31 December 2017. Mobily Sarl (“SARCI”), a minority shareholder of one of its subsidiaries, Telecommunication Regulatory Authority (NTRA) set tariffs section 12(2) CPC (Civil Procedure Code) which shall be decided has received 8 preliminary judgments in its favour and 5 final Telecel Benin where SARCI was seeking compensation for alleged imposed on operators plus interest dues. Arbitration preliminary by the concerned Court in accordance with the law, and to pursue judgments (stating that the subject matter of such cases have damages caused to Telecel Benin by Atlantique Telecom during proceedings are currently ongoing and exchanges of pleadings and all grounds of law and fact in other cases pending before the been previously decided). The remaining cases are still being the period from 2002 till 2007. Two arbitration proceedings on the cross examination of witnesses are scheduled in April 2018. High Courts. The Review Petitioners have filed the applications adjudicated before the Board of Grievance. Although Mobily same issue had been cancelled upon Atlantique Telecom’s request Based on the submitted arguments and supported documents under section 12(2) CPC before respective High Courts. Under the believes that these claims have no legal basis, they may have a in 2008 and 2013. In November 2015, the Arbitral Tribunal of a presented, management believes that the recorded circumstances, management of PTCL is of the view, that it is not material impact on Mobily’s business in case of retroactive change third proceeding launched in 2013 has awarded SARCI damages interconnection transactions have been fairly recognized in the possible at this stage to ascertain the financial obligations, if any, in the regulatory framework which is difficult to assess. amounting to approximately EURO 416 million (AED 1.6 billion). consolidated financial information as at 31 December 2017. flowing from the referred decision of the Apex Court which could SARCI has started execution proceedings in several African be disclosed in these consolidated financial statements. Mobily received additional claims from CITC during 2017 and has reassessed the provisions required against the claims for the iii) The Group’s associate, Etisalat Etihad Company (Mobily) has period ended 31 December 2017 and has recorded an appropriate received several penalty resolutions from the Communication estimate of the amount that it may ultimately have to pay to Information Technology Commission (CITC’s) Violation settle such claims. Committee which Mobily has objected to, in accordance with the Telecom regulations. The reasons of issuing these resolutions Furthermore, there are 176 lawsuits filed by some of the vary between the manner followed in issuing prepaid SIM cards shareholders against Mobily before the Committee for the and providing promotions that have not been approved by CITC Resolutions of Security Disputes with some still being adjudicated

144 145 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

36. Disposal Group held for sale/ Discontinued operations (continued)

34. Dividends Telecommunications Corporation and the Sudanese competition The results of operations included in the profit for the year from authorities. The final consideration received in return for the discontinued operations are set out below: Amounts recognised as distribution to equity holders: AED’000 Group’s shareholding amounted to AED 349.6 million. 31 December 2016 36.3 Analysis of loss for the year from discontinued operations Final dividend for the year ended 31 December 2015 of AED 0.40 per share 3,477,198 36.2 Plan to dispose one of its subsidiary Interim dividend for the year ended 31 December 2016 of AED 0.40 per share 3,477,198 6,954,396 The combined results of the discontinued operations included in the During the prior year, the directors approved a plan to dispose of profit for the year are set out below. The comparative loss and cash 31 December 2017 the Group’s interest in one of the subsidiaries of the group. The flows from discontinued operations have been re-presented to include Final dividend for the year ended 31 December 2016 of AED 0.40 per share 3,477,198 disposal is in line with the Group’s strategy to optimise its returns those operations classified as discontinued in the current year. Interim dividend for the year ended 31 December 2017 of AED 0.40 per share 3,477,198 on investments in the international segment. The Group is currently 6,954,396 in negotiation with some potential buyers. 2017 2016 A final dividend of AED 0.40 per share was declared by An interim dividend of AED 0.40 per share was declared by the Board Note AED’000 AED’000 the Board of Directors on 8 March 2017, bringing the of Directors on 26 July 2017 for the year ended 31 December 2017. Revenue 238,618 530,455 total dividend to AED 0.80 per share for the year ended 31 A final dividend of AED 0.40 per share was declared by the Board Operating expenses (408,550) (588,873) December 2016. of Directors on 20 February 2018, bringing the total dividend to Impairment and other losses (7,391) - AED 0.80 per share for the year ended 31 December 2017. Operating losses (177,323) (58,418) Finance and other income 1,382 2,671 35. Earnings per share Finance costs (15,512) (18,430) 2017 2016 Loss before tax (191,453) (74,177) AED’000 AED’000 Taxation (2,694) (8,605) Earnings (AED'000) (194,147) (82,782) Earnings for the purposes of basic earnings per share being the profit attributable to the 8,444,437 8,421,185 Losses on disposal of operation including cumulative exchange (losses)/gains reclassified 37 - (349,129) equity holders of the Company from foreign translation reserve to profit or loss Loss for the year from discontinued operations (194,147) (431,911) Number of shares ('000) Weighted average number of ordinary shares for the purposes of basic earnings per share 8,696,754 8,696,754 At 31 December 2017 the disposal group comprised the following assets and liabilities: Earnings per share From continuing and discontinuing operations 2017 2016 Basic and diluted AED 0.97 AED 0.97 Assets classified as held for sale AED’000 AED’000 From continuing operations Goodwill - 206,122 Basic and diluted AED 0.99 AED 1.02 Other intangible assets 14,511 26,416 Property, plant and equipment 403,712 559,638 Further to the announcement on 2 May 2016, the Bank of Deferred tax assets 52,171 68,491 36. Disposal Group held for sale/ Discontinued operations Inventories 389 1,645 Khartoum, an existing shareholder in Canar with a 3.7% Trade and other receivables 132,530 103,625 shareholding, exercised its Right of First Refusal with regards to Cash and cash equivalents 14,934 27,726 36.1 Disposal of Canar Telecommunications Co. Limited (‘’Canar’’) the sale by the Group of its shareholding in Canar to Zain Sudan. Assets classified as held for sale 618,247 993,663

2017 2016 On 2 May 2016, the Group and The Sudanese Mobile Telecom On 13 June 2016, the Group and Bank of Khartoum signed Liabilities classified as held for sale AED’000 AED’000 (Zain) Company Limited (‘’Zain Sudan’’) signed a Share Purchase definitive documentation for the purchase of the Group’s 92.3% Trade and other payables 217,517 204,251 Agreement for the sale of the Group’s 92.3% shareholding in Borrowings 107,089 96,626 shareholding in Canar. Canar. Under the terms of the Share Purchase Agreement, the Provision for end of service benefits 2,709 2,631 Group would have received a total cash consideration upon Provision 16,950 15,614 The Group completed the sale of its 92.3% shareholding Deferred tax liabilities 53,607 67,201 completion of the transaction of AED 349.6 million, implying a in Canar to Bank of Khartoum on 7 August 2016 after Finance lease obligation 9,309 9,952 price per share of AED 17.504. Liabilities associated with assets classified as held for sale 407,181 396,275 securing all regulatory approvals from the Sudanese National Net assets classified as held for sale 211,066 597,388

146 147 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS FINANCIALS Emirates Telecommunications Group Company PJSC Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 Notes to the consolidated financial statements for the year ended 31 December 2017

36. Disposal Group held for sale/ Discontinued operations (continued) 37. Disposal of Subsidiaries (continued)

2017 2016 37.3 Loss on disposal of subsidiaries Cash flows from discontinued operations AED’000 AED’000 2016 Net cash inflows from operating activities 34,593 197,303 Liabilities AED’000 Net cash outflows from investing activities (43,675) (101,212) Consideration received 349,589 Net cash outflows from financing activities (3,125) (190,105) Net (assets) / liabilities disposed of (220,375) Non controlling Interest 27,477 Net cash outflows (12,207) (94,014) Cumulative exchange gain in respect of the net assets of the subsidiary reclassified from equity (505,820) to profit or loss on loss of control of subsidiaries Loss on disposal (349,129) Cumulative income or expense recognised in other comprehensive income The loss on disposal is included in the loss for the period from discontinued operations (see note 36).

There are no cumulative income or expenses recognised in other comprehensive income relating to the disposal group. 37.4 Net cash inflow on disposal of subsidiaries 2016 37. Disposal of subsidiaries AED’000 Consideration received in cash and cash equivalents 349,589 On 7 August 2016, the Group completed the sale of it’s 92.3% shareholding in Canar to Bank of Khartoum. The Group received a final Less: cash and cash equivalent balances disposed of (70,556) consideration of AED 349.6 million, implying a price per share of AED 17.504. 279,033

37.1 Consideration received 38. Other significant event

2016 On 2 February 2012, the Supreme Court of India cancelled all of AED’000 Winding Up Order) and the Official Liquidator was appointed. Total consideration received 349,589 Etisalat DB Telecom Private Limited’s (“”Etisalat DB””) licenses, removing Etisalat DB’s ability to operate its current mobile An appeal was filed by the largest shareholder of Etisalat DB 37.2 Analysis of assets and liabilities over which control was lost telecommunications business. Following the cancellation, the against the Winding Up Order, along with a Notice of Motion 2016 Board of Etisalat DB resolved to shut down its telecommunications for stay of the operation of the order on 15 May 2015, before Assets AED’000 network in India and gave the appropriate notices to the Indian the Division Bench (Court of Appeal) of the High Court. That Other intangible assets 73,091 authorities. Furthermore, the resignation of the directors of appeal was heard and finally dismissed by an order dated 1 Inventories 547 Trade and other receivables 412,609 Etisalat DB, appointed by the largest shareholder, without November 2017. Cash and cash equivalents 70,556 replacement adversely affected the ability of the Etisalat DB’s 556,803 Board of Directors to take decisions. The Official Liquidator is in the process of winding up Etisalat DB 2016 and has taken material steps towards the liquidation of the assets AED’000 Liabilities Subsequently, Etisalat Mauritius Limited (EML) (which is wholly of Etisalat DB, since the order passed on 20 February 2015. The Trade and other payables 332,972 owned by the Company) filed a Petition on 12 March 2012 in the Official Liquidator’s progress reports continue to be heard by the Asset retirement obligations 3,456 336,428 High Court of Bombay (the High Court) for the just and equitable High Court as at the end of the reporting period. winding up of Etisalat DB (the Etisalat DB Petition). The Etisalat Net assets/(liabilities) 220,375 DB Petition was admitted by the High Court by Order dated 18 39. Offsetting financial assets and finan- November 2013 (Order on Admission). However, the Order on cial liabilities Admission was appealed by the largest shareholder of Etisalat DB to the Division Bench (Court of Appeal) of the High Court. That Financial assets and liabilities are offset and the net amount appeal was dismissed by an order dated 8 April 2014. The Order reported in the consolidated statement of financial position when, on Admission was further appealed by the same shareholder of and only when, there is a currently enforceable legal right to Etisalat DB to the Supreme Court of India but was finally dismissed offset the recognised amounts and there is an intention to settle by an order dated 14 July 2014. On 20 February 2015 an order on a net basis, or to realise the assets and settle the liabilities was made by the High Court for the winding up of Etisalat DB (the simultaneously. The criteria of legal enforceable right of set-off

148 149 ETISALAT GROUP | ANNUAL REPORT 2017 FINANCIALS NOTICE FOR ANNUAL Emirates Telecommunications Group Company PJSC Notes to the consolidated financial statements for the year ended 31 December 2017 GENERAL MEETING

39. Offsetting financial assets and financial liabilities (continued)

should be applicable in the normal course of business, in the event of default and in the event of insolvency or bankruptcy of the entity and The Board of Directors of Emirates Telecommunications Group 9. To elect four directors to fill the Board seats unassigned for all of the counterparties. Company PJSC (“Etisalat Group”) has the pleasure to invite the the Government’s Shareholder. esteemed shareholders to attend the Company’s Annual General The following table presents the recognised financial assets and liabilities that are offset, as at 31 December 2017 and 31 December 2016. Meeting (“AGM”) to be held on Wednesday, 21 March 2018, at 10. To pass a Special Resolution in respect of: Gross amounts Net amount 4:30 p.m. in Etisalat Group’s Head Office building located at the a. Approving a budget of not more than 1% of the Company’s Gross amounts set off presented intersection of Sheikh Zayed II Street and Sheikh Rashid Bin Saeed average net profits of the last two years (2016-2017) for 2017 2017 2017 Al Maktoum Road in Abu Dhabi, to discuss the following agenda: voluntary contributions to the community (Corporate Social AED ‘000 AED’000 AED ‘000 Financial assets Responsibility), and to authorize the Board of Directors to Amounts due from other telecommunication administrators 12,726,515 (6,532,952) 6,193,563 1. To hear and approve the report of the Board of Directors on effect payments of such contributions to beneficiaries to be Financial liabilities the Company’s activities and its financial position for the determined at the Board’s own discretion. Amounts due to other telecommunication administrators 11,953,497 (6,532,952) 5,420,545 financial year ended 31st December 2017. Gross amounts Net amount b. Amending the Articles No. 21, 26(1), 55(12), 67(1), and Gross amounts set off presented 2. To hear and approve the External Auditor’s report for the 67(2) of the Company’s Articles of Association (‘AoA”) 2016 2016 2016 AED ‘000 AED’000 AED ‘000 financial year ended 31st December 2017. after obtaining approval of the competent authorities. Financial assets Amounts due from other telecommunication administrators 12,186,362 (6,090,830) 6,095,532 3. To discuss and approve the Company’s consolidated financial c. Approving Company’s buyback of its shares within a Financial liabilities statements for the financial year ended 31st December 2017. maximum of 5% of its paid-up capital, for the purpose Amounts due to other telecommunication administrators 11,316,111 (6,090,830) 5,225,281 of cancelling or re-selling such shares, after obtaining

4. To consider the Board of Directors’ recommendation approval of competent authorities and empowering 40. Reclassification of comparative figures regarding the distribution of dividends amounting to 40 Fils the Company’s Board of Directors to finalize the rest of per share for the second half of the year 2017 and to approve procedures. The below reclassifications have been made to the prior year numbers to conform with current year presentation: the interim dividends amounting to 40 Fils per share which were distributed for the first half of the year 2017 by virtue Notes: 1. Reclassification of interconnect related party balances from 2. Foreign exchange difference on borrowings reclassified from of the Board resolution passed in its meeting held on 26th 1. Each shareholder is entitled to attend or to delegate to a trade and other receivables and trade and other payables to due operating expenses to finance and other costs. July 2017 to bring the total dividend pay out per share for the proxy, who is not a Board Member, to attend the AGM on from related parties. As previously financial year ended 31st December 2017 to 80 Fils per share his/her behalf by virtue of a written special authorization/ reported Reclassification Total (80 % of the nominal value of the share). proxy made pursuant to the delegation form attached with AED’000 AED’000 AED’000 the invitation dispatched by mail. All delegation forms Consolidated statement of financial position as at 31 December 2016 5. To absolve the Members of the Board of Directors from shall be submitted to the Securities Department of the Trade and other receivables 18,796,545 116,546 18,913,091 liability for the financial year ended 31st December 2017. First Abu Dhabi Bank (“FAB”) (formerly National Bank of Due from related parties 582,871 (142,228) 440,643 Abu Dhabi “NBAD”), P.O. Box 6865-Abu Dhabi, latest by Trade and other payables 30,798,176 (25,682) 30,772,494 6. To absolve the External Auditors from liability for the 18th March 2018. Only original delegation forms will be Consolidated statement of profit or loss for the year ended 31 financial year ended 31st December 2017. accepted. For AGM quorum purposes, a Proxy holder may December 2016 Operating expenses 34,605,422 (450,518) 34,154,904 not represent a number of shareholders whose aggregate Finance and other costs 1,461,626 450,518 1,912,144 7. To appoint the External Auditors for the year 2018 and to shareholding is in excess of 5% of the Company’s capital determine their fees. (except for Government Shareholder). However, if the proxy is representing one single shareholder, his/her proxy may 8. To approve the proposal concerning the remunerations exceed 5% of the Company’s capital. Minors and those who of the Board Members for the financial year ended 31st have no legal capacity shall be represented by their legal December 2017. representatives.

150 151 ETISALAT GROUP | ANNUAL REPORT 2017

2. Natural shareholders should submit original passport or UAE 8. The shareholders can review the Company’s financial I.D or Khulasat Al Qaid. The corporate shareholders shall statements, the governance report and the amendments to submit official documents issued by competent authorities to the AoA on the website of the Company and the website of prove the identity and nationality of their owners. Abu Dhabi Securities Exchange (ADX).

3. The corporate shareholder may authorize one of its 9. The AGM’s resolutions shall be passed by majority of 66% representatives or one of its management members by virtue of the ordinary shares represented in the AGM by owners of a resolution passed by its Board of Directors (or whoever attending in person or by proxy, unless the votable matter carries out the duties of the Board of Directors) to represent requires a special resolution passable by votes of shareholders it in the AGM. owning not less than three fourths of the shares represented in the meeting. 4. The convention of the AGM shall only be deemed valid if attended by Shareholders representing, in person or by proxy, 10. Attendance record shall be closed upon announcing the at least 66% of the Company’s ordinary shares. In case the quorum of the meeting. Shareholder or proxy who attends quorum is not achieved in the first meeting, a second meeting thereafter shall neither be recorded in the list nor be eligible for AGM should be held on Monday, 26th March 2018, in for voting on the matters addressable during the meeting. the same time and venue. The second meeting shall then be considered quorate and duly held regardless of the number of 11. The Shareholders should update their own contacts and attendees. addresses at ADX to ensure appropriate receipt of their dividends since the distribution of dividends for this year will 5. The owners of the shares registered on Tuesday, 20th March be through ADX. 2018, shall be entitled to vote in the AGM. In case first meeting is inquorate and a second meeting is convened 12. The closure of record for the 2017 second half dividends shall for the AGM on 26th March 2018, the owner of the shares be on Sunday, 1/4/2018, and the date of the last day of share registered on Sunday, 25th March 2018 shall be entitled to purchase that is entitled to dividends is 28/3/2018 and the vote in the second meeting of the AGM. date of exclusion from dividends is 29/3/2018. In case of convening a second AGM meeting due to inquorate 1st AGM 6. Notwithstanding item 5 above and for the purposes of voting meeting, then the closure of record for the 2017 second half in the AGM, the votes of the Associated Persons (as defined dividends shall be on Thursday, 05/4/2018, and the date of in Article 1 of Etisalat’s Articles of Association “AoA”) shall the last day of share purchase that is entitled to dividends be counted to the extent that they do not reach 5% of the is 03/4/2018 and the date of exclusion from dividends is ordinary shares represented in the AGM. 04/4/2018.

7. The restricted shares owned by non-national shareholders (categories of shareholders not mentioned in Article 7 of AoA) shall neither be counted in the quorum nor shall their holders be eligible for voting or participating in the AGM deliberations.

152 ETISALAT HEAD OFFICE Intersection of Zayed The 1st Street and Sheikh Rashid Bin Saeed Al Maktoum Street P.O. Box 3838, Abu Dhabi, UAE